Correlation Between CSX and Union Pacific
Can any of the company-specific risk be diversified away by investing in both CSX and Union Pacific at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CSX and Union Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and Union Pacific, you can compare the effects of market volatilities on CSX and Union Pacific and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CSX with a short position of Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Union Pacific.
Diversification Opportunities for CSX and Union Pacific
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CSX and Union is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific and CSX is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CSX Corporation are associated (or correlated) with Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of CSX i.e., CSX and Union Pacific go up and down completely randomly.
Pair Corralation between CSX and Union Pacific
Assuming the 90 days horizon CSX Corporation is expected to under-perform the Union Pacific. In addition to that, CSX is 1.22 times more volatile than Union Pacific. It trades about -0.23 of its total potential returns per unit of risk. Union Pacific is currently generating about -0.06 per unit of volatility. If you would invest 22,687 in Union Pacific on September 15, 2024 and sell it today you would lose (417.00) from holding Union Pacific or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSX Corp. vs. Union Pacific
Performance |
| Timeline |
| CSX Corporation |
| Union Pacific |
CSX and Union Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSX and Union Pacific
The main advantage of trading using opposite CSX and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, Union Pacific can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Union Pacific will offset losses from the drop in Union Pacific's long position.| CSX vs. GRIFFIN MINING LTD | CSX vs. Taiwan Semiconductor Manufacturing | CSX vs. GREENX METALS LTD | CSX vs. Elmos Semiconductor SE |
| Union Pacific vs. CSX Corporation | Union Pacific vs. Westinghouse Air Brake | Union Pacific vs. Superior Plus Corp | Union Pacific vs. SIVERS SEMICONDUCTORS AB |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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