Correlation Between Eastman Chemical and Endo International
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Endo International 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 Endo International 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 Endo International PLC, you can compare the effects of market volatilities on Eastman Chemical and Endo International 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 Endo International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Endo International.
Diversification Opportunities for Eastman Chemical and Endo International
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eastman and Endo is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and Endo International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endo International PLC 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 Endo International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endo International PLC has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Endo International go up and down completely randomly.
Pair Corralation between Eastman Chemical and Endo International
Assuming the 90 days trading horizon Eastman Chemical Co is expected to generate 2.55 times more return on investment than Endo International. However, Eastman Chemical is 2.55 times more volatile than Endo International PLC. It trades about 0.24 of its potential returns per unit of risk. Endo International PLC is currently generating about 0.41 per unit of risk. If you would invest 9,372 in Eastman Chemical Co on November 21, 2024 and sell it today you would earn a total of 943.00 from holding Eastman Chemical Co or generate 10.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Eastman Chemical Co vs. Endo International PLC
Performance |
Timeline |
Eastman Chemical |
Endo International PLC |
Eastman Chemical and Endo International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eastman Chemical and Endo International
The main advantage of trading using opposite Eastman Chemical and Endo International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Endo International 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 Endo International will offset losses from the drop in Endo International's long position.Eastman Chemical vs. JB Hunt Transport | ||
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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