Correlation Between Central Japan and CSX

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

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

Diversification Opportunities for Central Japan and CSX

-0.79

Correlation Coefficient

Central Japan  CSX

Pay attention - limited upside

The 3 months correlation between Central and CSX is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Central 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 Central 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 Central 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 Central Japan i.e., Central Japan and CSX go up and down completely randomly.

Pair Corralation between Central Japan and CSX

Assuming the 90 days horizon Central Japan Railway is expected to generate 1.12 times more return on investment than CSX. However, Central Japan is 1.12 times more volatile than CSX Corporation. It trades about 0.07 of its potential returns per unit of risk. CSX Corporation is currently generating about -0.08 per unit of risk. If you would invest  934.00  in Central Japan Railway on December 28, 2024 and sell it today you would earn a total of  55.00  from holding Central Japan Railway or generate 5.89% return on investment over 90 days.

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

Central Japan Railway  vs.  CSX Corp.

Central Japan Railway

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Japan Railway are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Central Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CSX Corporation

Risk-Adjusted Performance

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.

Pair Trading with Central Japan and CSX

The main advantage of trading using opposite Central Japan and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central 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.

The idea behind Central Japan Railway and CSX Corporation 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 Commodity Directory module to find actively traded commodities issued by global exchanges.