Correlation Between West Japan and CSX
Can any of the company-specific risk be diversified away by investing in both West 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 West Japan and CSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Japan Railway and CSX Corporation, you can compare the effects of market volatilities on West 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 West Japan with a short position of CSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Japan and CSX.
Diversification Opportunities for West Japan and CSX
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between West and CSX is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding West 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 West 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 West 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 West Japan i.e., West Japan and CSX go up and down completely randomly.
Pair Corralation between West Japan and CSX
Assuming the 90 days horizon West Japan is expected to generate 2.38 times less return on investment than CSX. But when comparing it to its historical volatility, West Japan Railway is 2.33 times less risky than CSX. It trades about 0.16 of its potential returns per unit of risk. CSX Corporation is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,310 in CSX Corporation on August 25, 2024 and sell it today you would earn a total of 265.50 from holding CSX Corporation or generate 8.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Japan Railway vs. CSX Corp.
Performance |
| Timeline |
| West Japan Railway |
| CSX Corporation |
West Japan and CSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Japan and CSX
The main advantage of trading using opposite West Japan and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West 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.| West Japan vs. Central Japan Railway | West Japan vs. LB Foster | West Japan vs. East Japan Railway | West Japan vs. Greenbrier Companies |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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