Correlation Between CSX and Canadian National

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

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

Diversification Opportunities for CSX and Canadian National

0.82

Correlation Coefficient

CSX  Canadian National

Very poor diversification

The 3 months correlation between CSX and Canadian is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of CSX i.e., CSX and Canadian National go up and down completely randomly.

Pair Corralation between CSX and Canadian National

Considering the 90-day investment horizon CSX Corporation is expected to generate 0.89 times more return on investment than Canadian National. However, CSX Corporation is 1.12 times less risky than Canadian National. It trades about 0.25 of its potential returns per unit of risk. Canadian National Railway is currently generating about 0.06 per unit of risk. If you would invest  2,757  in CSX Corporation on April 17, 2025 and sell it today you would earn a total of  567.00  from holding CSX Corporation or generate 20.57% return on investment over 90 days.

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

CSX Corp.  vs.  Canadian National Railway

CSX Corporation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 19 (%) 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.

Canadian National Railway

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian National Railway are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Canadian National is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CSX and Canadian National

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

The idea behind CSX Corporation and Canadian National 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.