Correlation Between CSX and Hawaiian Holdings

Can any of the company-specific risk be diversified away by investing in both CSX and Hawaiian Holdings 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 CSX and Hawaiian Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CSX Corporation and Hawaiian Holdings, you can compare the effects of market volatilities on CSX and Hawaiian Holdings 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 CSX with a short position of Hawaiian Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Hawaiian Holdings.

Diversification Opportunities for CSX and Hawaiian Holdings

0.85

Correlation Coefficient

CSX  Hawaiian Holdings

Very poor diversification

The 3 months correlation between CSX and Hawaiian is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Hawaiian Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Holdings and CSX 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 CSX Corporation are associated (or correlated) with Hawaiian Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Holdings has no effect on the direction of CSX i.e., CSX and Hawaiian Holdings go up and down completely randomly.

Pair Corralation between CSX and Hawaiian Holdings

Considering the 90-day investment horizon CSX Corporation is expected to under-perform the Hawaiian Holdings. But the stock apears to be less risky and, when comparing its historical volatility, CSX Corporation is 1.68 times less risky than Hawaiian Holdings. The stock trades about -0.13 of its potential returns per unit of risk. The Hawaiian Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,327  in Hawaiian Holdings on February 15, 2024 and sell it today you would earn a total of  21.00  from holding Hawaiian Holdings or generate 1.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

CSX Corp.  vs.  Hawaiian Holdings

CSX Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hawaiian Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hawaiian Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CSX and Hawaiian Holdings

The main advantage of trading using opposite CSX and Hawaiian Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, Hawaiian Holdings 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 Hawaiian Holdings will offset losses from the drop in Hawaiian Holdings' long position.

The idea behind CSX Corporation and Hawaiian Holdings 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.