Correlation Between Eastman Chemical and American Homes
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and American Homes 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 Eastman Chemical and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical Co and American Homes 4, you can compare the effects of market volatilities on Eastman Chemical and American Homes 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 Eastman Chemical with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and American Homes.
Diversification Opportunities for Eastman Chemical and American Homes
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Eastman and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and Eastman Chemical 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 Eastman Chemical Co are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and American Homes go up and down completely randomly.
Pair Corralation between Eastman Chemical and American Homes
Assuming the 90 days trading horizon Eastman Chemical is expected to generate 1.78 times less return on investment than American Homes. In addition to that, Eastman Chemical is 1.41 times more volatile than American Homes 4. It trades about 0.13 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.32 per unit of volatility. If you would invest 3,520 in American Homes 4 on September 4, 2024 and sell it today you would earn a total of 241.00 from holding American Homes 4 or generate 6.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical Co vs. American Homes 4
Performance |
| Timeline |
| Eastman Chemical |
| American Homes 4 |
Eastman Chemical and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and American Homes
The main advantage of trading using opposite Eastman Chemical and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| Eastman Chemical vs. Samsung Electronics Co | Eastman Chemical vs. Samsung Electronics Co | Eastman Chemical vs. Hyundai Motor | Eastman Chemical vs. Toyota Motor Corp |
| American Homes vs. One Media iP | American Homes vs. Live Nation Entertainment | American Homes vs. Check Point Software | American Homes vs. Flutter Entertainment PLC |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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