Correlation Between CSX and Keisei Electric

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

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

Diversification Opportunities for CSX and Keisei Electric

0.36

Correlation Coefficient

CSX  Keisei Electric

Weak diversification

The 3 months correlation between CSX and Keisei is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Keisei Electric Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keisei Electric Railway 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 Keisei Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keisei Electric Railway has no effect on the direction of CSX i.e., CSX and Keisei Electric go up and down completely randomly.

Pair Corralation between CSX and Keisei Electric

Assuming the 90 days horizon CSX Corporation is expected to under-perform the Keisei Electric. But the stock apears to be less risky and, when comparing its historical volatility, CSX Corporation is 2.57 times less risky than Keisei Electric. The stock trades about -0.17 of its potential returns per unit of risk. The Keisei Electric Railway is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,340  in Keisei Electric Railway on September 22, 2024 and sell it today you would earn a total of  140.00  from holding Keisei Electric Railway or generate 5.98% return on investment over 90 days.

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

CSX Corp.  vs.  Keisei Electric Railway

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 nearly stable basic indicators, CSX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Keisei Electric Railway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keisei Electric Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CSX and Keisei Electric

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

The idea behind CSX Corporation and Keisei Electric Railway 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.