Correlation Between Eastman Chemical and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Fevertree Drinks 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 Fevertree Drinks 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 Fevertree Drinks Plc, you can compare the effects of market volatilities on Eastman Chemical and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Fevertree Drinks.
Diversification Opportunities for Eastman Chemical and Fevertree Drinks
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Eastman and Fevertree is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Eastman Chemical and Fevertree Drinks
Assuming the 90 days trading horizon Eastman Chemical Co is expected to generate 0.64 times more return on investment than Fevertree Drinks. However, Eastman Chemical Co is 1.56 times less risky than Fevertree Drinks. It trades about 0.06 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.12 per unit of risk. If you would invest 9,986 in Eastman Chemical Co on September 3, 2024 and sell it today you would earn a total of 486.00 from holding Eastman Chemical Co or generate 4.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Eastman Chemical Co vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Eastman Chemical |
| Fevertree Drinks Plc |
Eastman Chemical and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Fevertree Drinks
The main advantage of trading using opposite Eastman Chemical and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| Eastman Chemical vs. Live Nation Entertainment | Eastman Chemical vs. Wyndham Hotels Resorts | Eastman Chemical vs. Scandic Hotels Group | Eastman Chemical vs. Centaur Media |
| Fevertree Drinks vs. Air Products Chemicals | Fevertree Drinks vs. Sabien Technology Group | Fevertree Drinks vs. Alfa Financial Software | Fevertree Drinks vs. Albion Technology General |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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