Correlation Between Union Pacific and CSX
Can any of the company-specific risk be diversified away by investing in both Union Pacific 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 Union Pacific and CSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Pacific and CSX Corporation, you can compare the effects of market volatilities on Union Pacific 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 Union Pacific with a short position of CSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Pacific and CSX.
Diversification Opportunities for Union Pacific and CSX
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Union and CSX is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Union Pacific and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation and Union Pacific 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 Union Pacific 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 Union Pacific i.e., Union Pacific and CSX go up and down completely randomly.
Pair Corralation between Union Pacific and CSX
Considering the 90-day investment horizon Union Pacific is expected to under-perform the CSX. But the stock apears to be less risky and, when comparing its historical volatility, Union Pacific is 1.16 times less risky than CSX. The stock trades about -0.01 of its potential returns per unit of risk. The CSX Corporation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,385 in CSX Corporation on August 23, 2024 and sell it today you would earn a total of 149.00 from holding CSX Corporation or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Pacific vs. CSX Corp.
Performance |
| Timeline |
| Union Pacific |
| CSX Corporation |
Union Pacific and CSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Pacific and CSX
The main advantage of trading using opposite Union Pacific and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Pacific 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.| Union Pacific vs. Norfolk Southern | Union Pacific vs. CSX Corporation | Union Pacific vs. United Parcel Service | Union Pacific vs. Canadian National 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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