Correlation Between Eastman Chemical and BYD ELECTRONIC
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and BYD ELECTRONIC 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 BYD ELECTRONIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and BYD ELECTRONIC, you can compare the effects of market volatilities on Eastman Chemical and BYD ELECTRONIC 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 BYD ELECTRONIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and BYD ELECTRONIC.
Diversification Opportunities for Eastman Chemical and BYD ELECTRONIC
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastman and BYD is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and BYD ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD ELECTRONIC 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 are associated (or correlated) with BYD ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD ELECTRONIC has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and BYD ELECTRONIC go up and down completely randomly.
Pair Corralation between Eastman Chemical and BYD ELECTRONIC
Assuming the 90 days horizon Eastman Chemical is expected to generate 2.03 times less return on investment than BYD ELECTRONIC. But when comparing it to its historical volatility, Eastman Chemical is 2.81 times less risky than BYD ELECTRONIC. It trades about 0.21 of its potential returns per unit of risk. BYD ELECTRONIC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 406.00 in BYD ELECTRONIC on September 4, 2024 and sell it today you would earn a total of 55.00 from holding BYD ELECTRONIC or generate 13.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Eastman Chemical vs. BYD ELECTRONIC
Performance |
| Timeline |
| Eastman Chemical |
| BYD ELECTRONIC |
Eastman Chemical and BYD ELECTRONIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and BYD ELECTRONIC
The main advantage of trading using opposite Eastman Chemical and BYD ELECTRONIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, BYD ELECTRONIC 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 BYD ELECTRONIC will offset losses from the drop in BYD ELECTRONIC's long position.| Eastman Chemical vs. AIR LIQUIDE ADR | Eastman Chemical vs. BASF SE | Eastman Chemical vs. BASF SE | Eastman Chemical vs. BASF SE |
| BYD ELECTRONIC vs. TOTAL GABON | BYD ELECTRONIC vs. Walgreens Boots Alliance | BYD ELECTRONIC vs. Peak Resources Limited |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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