Correlation Between Eastman Chemical and Arrowhead Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals Corp, you can compare the effects of market volatilities on Eastman Chemical and Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Arrowhead Pharmaceuticals.
Diversification Opportunities for Eastman Chemical and Arrowhead Pharmaceuticals
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eastman and Arrowhead is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and Arrowhead Pharmaceuticals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowhead Pharmaceuticals has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Arrowhead Pharmaceuticals go up and down completely randomly.
Pair Corralation between Eastman Chemical and Arrowhead Pharmaceuticals
Assuming the 90 days trading horizon Eastman Chemical Co is expected to under-perform the Arrowhead Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical Co is 5.34 times less risky than Arrowhead Pharmaceuticals. The stock trades about -0.06 of its potential returns per unit of risk. The Arrowhead Pharmaceuticals Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,128 in Arrowhead Pharmaceuticals Corp on September 13, 2024 and sell it today you would earn a total of 196.00 from holding Arrowhead Pharmaceuticals Corp or generate 9.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Eastman Chemical Co vs. Arrowhead Pharmaceuticals Corp
Performance |
| Timeline |
| Eastman Chemical |
| Arrowhead Pharmaceuticals |
Eastman Chemical and Arrowhead Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Arrowhead Pharmaceuticals
The main advantage of trading using opposite Eastman Chemical and Arrowhead Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals will offset losses from the drop in Arrowhead Pharmaceuticals' long position.| Eastman Chemical vs. Axfood AB | Eastman Chemical vs. Taiwan Semiconductor Manufacturing | Eastman Chemical vs. Roper Technologies | Eastman Chemical vs. Elmos Semiconductor SE |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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