Correlation Between Norfolk Southern and CSX
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern 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 Norfolk Southern and CSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and CSX Corporation, you can compare the effects of market volatilities on Norfolk Southern 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 Norfolk Southern with a short position of CSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and CSX.
Diversification Opportunities for Norfolk Southern and CSX
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norfolk and CSX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation and Norfolk Southern 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 Norfolk Southern 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 Norfolk Southern i.e., Norfolk Southern and CSX go up and down completely randomly.
Pair Corralation between Norfolk Southern and CSX
Considering the 90-day investment horizon Norfolk Southern is expected to generate 1.31 times more return on investment than CSX. However, Norfolk Southern is 1.31 times more volatile than CSX Corporation. It trades about 0.06 of its potential returns per unit of risk. CSX Corporation is currently generating about 0.04 per unit of risk. If you would invest 21,330 in Norfolk Southern on August 26, 2024 and sell it today you would earn a total of 5,565 from holding Norfolk Southern or generate 26.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norfolk Southern vs. CSX Corp.
Performance |
| Timeline |
| Norfolk Southern |
| CSX Corporation |
Norfolk Southern and CSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and CSX
The main advantage of trading using opposite Norfolk Southern and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern 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.| Norfolk Southern vs. Union Pacific | Norfolk Southern vs. Canadian Pacific Railway | Norfolk Southern vs. Canadian National Railway | Norfolk Southern vs. Westinghouse Air Brake |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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