Correlation Between Albemarle and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Albemarle and Eastman Chemical 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 Albemarle and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albemarle and Eastman Chemical, you can compare the effects of market volatilities on Albemarle and Eastman Chemical 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 Albemarle with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and Eastman Chemical.
Diversification Opportunities for Albemarle and Eastman Chemical
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Albemarle and Eastman is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Albemarle 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 Albemarle are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Albemarle i.e., Albemarle and Eastman Chemical go up and down completely randomly.
Pair Corralation between Albemarle and Eastman Chemical
Assuming the 90 days trading horizon Albemarle is expected to generate 3.33 times less return on investment than Eastman Chemical. In addition to that, Albemarle is 1.72 times more volatile than Eastman Chemical. It trades about 0.01 of its total potential returns per unit of risk. Eastman Chemical is currently generating about 0.04 per unit of volatility. If you would invest 8,005 in Eastman Chemical on August 26, 2024 and sell it today you would earn a total of 2,554 from holding Eastman Chemical or generate 31.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 37.02% |
| Values | Daily Returns |
Albemarle vs. Eastman Chemical
Performance |
| Timeline |
| Albemarle |
| Eastman Chemical |
Albemarle and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Albemarle and Eastman Chemical
The main advantage of trading using opposite Albemarle and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albemarle position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Albemarle vs. Titan Machinery | Albemarle vs. Simon Property Group | Albemarle vs. Kite Realty Group | Albemarle vs. National Vision Holdings |
| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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