Correlation Between MTR Corp and CSX
Can any of the company-specific risk be diversified away by investing in both MTR Corp 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 MTR Corp and CSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTR Corp and CSX Corporation, you can compare the effects of market volatilities on MTR Corp 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 MTR Corp with a short position of CSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTR Corp and CSX.
Diversification Opportunities for MTR Corp and CSX
Good diversification
The 3 months correlation between MTR and CSX is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding MTR Corp and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation and MTR Corp 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 MTR Corp 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 MTR Corp i.e., MTR Corp and CSX go up and down completely randomly.
Pair Corralation between MTR Corp and CSX
Assuming the 90 days horizon MTR Corp is expected to under-perform the CSX. In addition to that, MTR Corp is 1.15 times more volatile than CSX Corporation. It trades about -0.22 of its total potential returns per unit of risk. CSX Corporation is currently generating about 0.21 per unit of volatility. If you would invest 3,325 in CSX Corporation on September 3, 2024 and sell it today you would earn a total of 330.00 from holding CSX Corporation or generate 9.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTR Corp vs. CSX Corp.
Performance |
| Timeline |
| MTR Corp |
| CSX Corporation |
MTR Corp and CSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTR Corp and CSX
The main advantage of trading using opposite MTR Corp and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTR Corp 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.The idea behind MTR Corp and CSX Corporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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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