Correlation Between CSX and Nishi Nippon

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

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

Diversification Opportunities for CSX and Nishi Nippon

0.17

Correlation Coefficient

CSX  Nishi Nippon

Average diversification

The 3 months correlation between CSX and Nishi is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Nishi Nippon Railroad Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishi Nippon Railroad 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 Nishi Nippon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishi Nippon Railroad has no effect on the direction of CSX i.e., CSX and Nishi Nippon go up and down completely randomly.

Pair Corralation between CSX and Nishi Nippon

Assuming the 90 days horizon CSX Corporation is expected to under-perform the Nishi Nippon. But the stock apears to be less risky and, when comparing its historical volatility, CSX Corporation is 1.34 times less risky than Nishi Nippon. The stock trades about -0.23 of its potential returns per unit of risk. The Nishi Nippon Railroad Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,320  in Nishi Nippon Railroad Co on September 15, 2024 and sell it today you would earn a total of  60.00  from holding Nishi Nippon Railroad Co or generate 4.55% return on investment over 90 days.

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

CSX Corp.  vs.  Nishi Nippon Railroad Co

CSX Corporation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Nishi Nippon Railroad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nishi Nippon Railroad Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nishi Nippon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CSX and Nishi Nippon

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

The idea behind CSX Corporation and Nishi Nippon Railroad Co 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.