Correlation Between CSX and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both CSX and Norfolk Southern 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 Norfolk Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and Norfolk Southern, you can compare the effects of market volatilities on CSX and Norfolk Southern 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 Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Norfolk Southern.
Diversification Opportunities for CSX and Norfolk Southern
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between CSX and Norfolk is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern 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 Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of CSX i.e., CSX and Norfolk Southern go up and down completely randomly.
Pair Corralation between CSX and Norfolk Southern
Considering the 90-day investment horizon CSX Corporation is expected to generate 0.72 times more return on investment than Norfolk Southern. However, CSX Corporation is 1.39 times less risky than Norfolk Southern. It trades about 0.02 of its potential returns per unit of risk. Norfolk Southern is currently generating about -0.12 per unit of risk. If you would invest 3,320 in CSX Corporation on March 2, 2024 and sell it today you would earn a total of 10.00 from holding CSX Corporation or generate 0.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
CSX Corp. vs. Norfolk Southern
Performance |
Timeline |
CSX Corporation |
Norfolk Southern |
CSX and Norfolk Southern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CSX and Norfolk Southern
The main advantage of trading using opposite CSX and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX position performs unexpectedly, Norfolk Southern 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 Norfolk Southern will offset losses from the drop in Norfolk Southern's long position.CSX vs. Westinghouse Air Brake | CSX vs. Trinity Industries | CSX vs. Greenbrier Companies | CSX vs. LB Foster |
Norfolk Southern vs. Westinghouse Air Brake | Norfolk Southern vs. Trinity Industries | Norfolk Southern vs. Greenbrier Companies | Norfolk Southern vs. LB Foster |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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