Correlation Between East Japan and CSX
Can any of the company-specific risk be diversified away by investing in both East Japan and CSX 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 East Japan and CSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Japan Railway and CSX Corporation, you can compare the effects of market volatilities on East Japan and CSX 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 East Japan with a short position of CSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and CSX.
Diversification Opportunities for East Japan and CSX
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and CSX is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation and East Japan 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 East Japan Railway are associated (or correlated) with CSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSX Corporation has no effect on the direction of East Japan i.e., East Japan and CSX go up and down completely randomly.
Pair Corralation between East Japan and CSX
Assuming the 90 days horizon East Japan Railway is expected to under-perform the CSX. But the pink sheet apears to be less risky and, when comparing its historical volatility, East Japan Railway is 1.36 times less risky than CSX. The pink sheet trades about -0.08 of its potential returns per unit of risk. The CSX Corporation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,353 in CSX Corporation on September 1, 2024 and sell it today you would earn a total of 302.00 from holding CSX Corporation or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Japan Railway vs. CSX Corp.
Performance |
| Timeline |
| East Japan Railway |
| CSX Corporation |
East Japan and CSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and CSX
The main advantage of trading using opposite East Japan and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan position performs unexpectedly, CSX 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 CSX will offset losses from the drop in CSX's long position.| East Japan vs. Central Japan Railway | East Japan vs. LB Foster | East Japan vs. Canadian National Railway | East Japan vs. West Japan Railway |
| CSX vs. Union Pacific | CSX vs. Canadian National Railway | CSX vs. Canadian Pacific Railway | CSX vs. Westinghouse Air Brake |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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