Correlation Between CSX and Freightcar America

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

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

Diversification Opportunities for CSX and Freightcar America

0.56

Correlation Coefficient

CSX  Freightcar America

Very weak diversification

The 3 months correlation between CSX and Freightcar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Freightcar America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freightcar America 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 Freightcar America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freightcar America has no effect on the direction of CSX i.e., CSX and Freightcar America go up and down completely randomly.

Pair Corralation between CSX and Freightcar America

Considering the 90-day investment horizon CSX Corporation is expected to generate 0.26 times more return on investment than Freightcar America. However, CSX Corporation is 3.83 times less risky than Freightcar America. It trades about 0.26 of its potential returns per unit of risk. Freightcar America is currently generating about 0.07 per unit of risk. If you would invest  3,036  in CSX Corporation on May 21, 2025 and sell it today you would earn a total of  616.00  from holding CSX Corporation or generate 20.29% return on investment over 90 days.

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

CSX Corp.  vs.  Freightcar America

CSX Corporation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CSX showed solid returns over the last few months and may actually be approaching a breakup point.

Freightcar America

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Freightcar America are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Freightcar America disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSX and Freightcar America

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

The idea behind CSX Corporation and Freightcar America 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.