Correlation Between Canadian National and CSX

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

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

Diversification Opportunities for Canadian National and CSX

0.52

Correlation Coefficient

Canadian National  CSX

Very weak diversification

The 3 months correlation between Canadian and CSX is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation and Canadian National 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 Canadian National 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 Canadian National i.e., Canadian National and CSX go up and down completely randomly.

Pair Corralation between Canadian National and CSX

Assuming the 90 days trading horizon Canadian National is expected to generate 14.17 times less return on investment than CSX. In addition to that, Canadian National is 1.08 times more volatile than CSX Corporation. It trades about 0.02 of its total potential returns per unit of risk. CSX Corporation is currently generating about 0.28 per unit of volatility. If you would invest  2,748  in CSX Corporation on April 23, 2025 and sell it today you would earn a total of  688.00  from holding CSX Corporation or generate 25.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Canadian National Railway  vs.  CSX Corp.

Canadian National Railway

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian National Railway are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Canadian National is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CSX Corporation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, CSX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian National and CSX

The main advantage of trading using opposite Canadian National and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National 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 Canadian National 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.