Correlation Between Eastman Chemical and Direct Line
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Direct Line 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 Direct Line 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 Direct Line Insurance, you can compare the effects of market volatilities on Eastman Chemical and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Direct Line.
Diversification Opportunities for Eastman Chemical and Direct Line
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Eastman and Direct is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Direct Line go up and down completely randomly.
Pair Corralation between Eastman Chemical and Direct Line
Assuming the 90 days trading horizon Eastman Chemical is expected to generate 6.1 times less return on investment than Direct Line. In addition to that, Eastman Chemical is 1.93 times more volatile than Direct Line Insurance. It trades about 0.03 of its total potential returns per unit of risk. Direct Line Insurance is currently generating about 0.33 per unit of volatility. If you would invest 25,380 in Direct Line Insurance on October 25, 2024 and sell it today you would earn a total of 1,320 from holding Direct Line Insurance or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 84.21% |
| Values | Daily Returns |
Eastman Chemical Co vs. Direct Line Insurance
Performance |
| Timeline |
| Eastman Chemical |
| Direct Line Insurance |
Eastman Chemical and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Direct Line
The main advantage of trading using opposite Eastman Chemical and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Eastman Chemical vs. Central Asia Metals | Eastman Chemical vs. Taiwan Semiconductor Manufacturing | Eastman Chemical vs. Odfjell Drilling | Eastman Chemical vs. AMG Advanced Metallurgical |
| Direct Line vs. Games Workshop Group | Direct Line vs. Auto Trader Group | Direct Line vs. Coor Service Management | Direct Line vs. iShares Dow Jones |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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