Correlation Between CSX and Dow Jones
Can any of the company-specific risk be diversified away by investing in both CSX and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and Dow Jones Industrial, you can compare the effects of market volatilities on CSX and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Dow Jones.
Diversification Opportunities for CSX and Dow Jones
Very poor diversification
The 3 months correlation between CSX and Dow is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of CSX i.e., CSX and Dow Jones go up and down completely randomly.
Pair Corralation between CSX and Dow Jones
Assuming the 90 days trading horizon CSX Corporation is expected to generate 2.97 times more return on investment than Dow Jones. However, CSX is 2.97 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 3,065 in CSX Corporation on August 30, 2024 and sell it today you would earn a total of 388.00 from holding CSX Corporation or generate 12.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSX Corp. vs. Dow Jones Industrial
Performance |
| Timeline |
CSX and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
CSX Corporation
Pair trading matchups for CSX
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with CSX and Dow Jones
The main advantage of trading using opposite CSX and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| CSX vs. UMC Electronics Co | CSX vs. AOI Electronics Co | CSX vs. Gladstone Investment | CSX vs. AOYAMA TRADING |
| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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