Correlation Between American Homes and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both American Homes and Eastman Chemical 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 American Homes and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Eastman Chemical Co, you can compare the effects of market volatilities on American Homes and Eastman Chemical 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 American Homes with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Eastman Chemical.
Diversification Opportunities for American Homes and Eastman Chemical
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Eastman is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and American Homes 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 American Homes 4 are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of American Homes i.e., American Homes and Eastman Chemical go up and down completely randomly.
Pair Corralation between American Homes and Eastman Chemical
Assuming the 90 days trading horizon American Homes is expected to generate 1.15 times less return on investment than Eastman Chemical. But when comparing it to its historical volatility, American Homes 4 is 1.24 times less risky than Eastman Chemical. It trades about 0.04 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8,174 in Eastman Chemical Co on September 4, 2024 and sell it today you would earn a total of 2,210 from holding Eastman Chemical Co or generate 27.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 94.13% |
| Values | Daily Returns |
American Homes 4 vs. Eastman Chemical Co
Performance |
| Timeline |
| American Homes 4 |
| Eastman Chemical |
American Homes and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Eastman Chemical
The main advantage of trading using opposite American Homes and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| American Homes vs. One Media iP | American Homes vs. Live Nation Entertainment | American Homes vs. Check Point Software | American Homes vs. Flutter Entertainment PLC |
| Eastman Chemical vs. Samsung Electronics Co | Eastman Chemical vs. Samsung Electronics Co | Eastman Chemical vs. Hyundai Motor | Eastman Chemical vs. Toyota Motor Corp |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |