Correlation Between CSX and Transport International

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

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

Diversification Opportunities for CSX and Transport International

-0.62

Correlation Coefficient

CSX  Transport International

Excellent diversification

The 3 months correlation between CSX and Transport is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Transport International Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport International 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 Transport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport International has no effect on the direction of CSX i.e., CSX and Transport International go up and down completely randomly.

Pair Corralation between CSX and Transport International

Assuming the 90 days horizon CSX Corporation is expected to under-perform the Transport International. But the stock apears to be less risky and, when comparing its historical volatility, CSX Corporation is 11.94 times less risky than Transport International. The stock trades about -0.1 of its potential returns per unit of risk. The Transport International Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Transport International Holdings on March 8, 2024 and sell it today you would earn a total of  45.00  from holding Transport International Holdings or generate 80.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CSX Corp.  vs.  Transport International Holdin

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Transport International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transport International Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Transport International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSX and Transport International

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

The idea behind CSX Corporation and Transport International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.