Correlation Between Aluminumof China and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Aluminumof China 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 Aluminumof China and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Eastman Chemical, you can compare the effects of market volatilities on Aluminumof China 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 Aluminumof China with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Eastman Chemical.
Diversification Opportunities for Aluminumof China and Eastman Chemical
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aluminumof and Eastman is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and Eastman Chemical go up and down completely randomly.
Pair Corralation between Aluminumof China and Eastman Chemical
Assuming the 90 days horizon Aluminum of is expected to generate 2.82 times more return on investment than Eastman Chemical. However, Aluminumof China is 2.82 times more volatile than Eastman Chemical. It trades about 0.04 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.04 per unit of risk. If you would invest 56.00 in Aluminum of on September 12, 2024 and sell it today you would earn a total of 1.00 from holding Aluminum of or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Eastman Chemical
Performance |
| Timeline |
| Aluminumof China |
| Eastman Chemical |
Aluminumof China and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Eastman Chemical
The main advantage of trading using opposite Aluminumof China and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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.| Aluminumof China vs. Norsk Hydro ASA | Aluminumof China vs. Kaiser Aluminum | Aluminumof China vs. Superior Plus Corp | Aluminumof China vs. SIVERS SEMICONDUCTORS AB |
| Eastman Chemical vs. AIR LIQUIDE ADR | Eastman Chemical vs. Shin Etsu Chemical Co | Eastman Chemical vs. Ganfeng Lithium Co | Eastman Chemical vs. Superior Plus Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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