Correlation Between Eastman Chemical and Malvern International
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Malvern 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 Malvern 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 Malvern International, you can compare the effects of market volatilities on Eastman Chemical and Malvern 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 Malvern International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Malvern International.
Diversification Opportunities for Eastman Chemical and Malvern International
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Eastman and Malvern is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and Malvern International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malvern International 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 Malvern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malvern International has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Malvern International go up and down completely randomly.
Pair Corralation between Eastman Chemical and Malvern International
Assuming the 90 days trading horizon Eastman Chemical is expected to generate 5.16 times less return on investment than Malvern International. But when comparing it to its historical volatility, Eastman Chemical Co is 1.59 times less risky than Malvern International. It trades about 0.11 of its potential returns per unit of risk. Malvern International is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Malvern International on September 2, 2024 and sell it today you would earn a total of 350.00 from holding Malvern International or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Eastman Chemical Co vs. Malvern International
Performance |
| Timeline |
| Eastman Chemical |
| Malvern International |
Eastman Chemical and Malvern International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Malvern International
The main advantage of trading using opposite Eastman Chemical and Malvern International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Malvern 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 Malvern International will offset losses from the drop in Malvern International's long position.| Eastman Chemical vs. Uniper SE | Eastman Chemical vs. Mulberry Group PLC | Eastman Chemical vs. London Security Plc | Eastman Chemical vs. Triad Group PLC |
| Malvern International vs. Berkshire Hathaway | Malvern International vs. Hyundai Motor | Malvern International vs. Samsung Electronics Co | Malvern International vs. Samsung Electronics Co |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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