Correlation Between CSX and IShares Technology

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

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

Diversification Opportunities for CSX and IShares Technology

0.6

Correlation Coefficient

CSX  IShares Technology

Poor diversification

The 3 months correlation between CSX and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and iShares Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology ETF 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 IShares Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of CSX i.e., CSX and IShares Technology go up and down completely randomly.

Pair Corralation between CSX and IShares Technology

Considering the 90-day investment horizon CSX Corporation is expected to under-perform the IShares Technology. But the stock apears to be less risky and, when comparing its historical volatility, CSX Corporation is 1.46 times less risky than IShares Technology. The stock trades about -0.42 of its potential returns per unit of risk. The iShares Technology ETF is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  13,506  in iShares Technology ETF on January 28, 2024 and sell it today you would lose (411.00) from holding iShares Technology ETF or give up 3.04% of portfolio value over 90 days.

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

CSX Corp.  vs.  iShares Technology ETF

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. In spite of fairly strong basic indicators, CSX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares Technology ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Technology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CSX and IShares Technology

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

The idea behind CSX Corporation and iShares Technology ETF 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..