Correlation Between Eastman Chemical and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Iridium Communications 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 Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Iridium Communications, you can compare the effects of market volatilities on Eastman Chemical and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Iridium Communications.
Diversification Opportunities for Eastman Chemical and Iridium Communications
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastman and Iridium is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Iridium Communications go up and down completely randomly.
Pair Corralation between Eastman Chemical and Iridium Communications
Assuming the 90 days horizon Eastman Chemical is expected to generate 0.62 times more return on investment than Iridium Communications. However, Eastman Chemical is 1.61 times less risky than Iridium Communications. It trades about 0.04 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.03 per unit of risk. If you would invest 7,553 in Eastman Chemical on September 3, 2024 and sell it today you would earn a total of 2,319 from holding Eastman Chemical or generate 30.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Iridium Communications
Performance |
| Timeline |
| Eastman Chemical |
| Iridium Communications |
Eastman Chemical and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Iridium Communications
The main advantage of trading using opposite Eastman Chemical and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Eastman Chemical vs. Vulcan Materials | Eastman Chemical vs. Broadwind | Eastman Chemical vs. Transportadora de Gas | Eastman Chemical vs. URBAN OUTFITTERS |
| Iridium Communications vs. Cardinal Health | Iridium Communications vs. EPSILON HEALTHCARE LTD | Iridium Communications vs. Computer And Technologies | Iridium Communications vs. Spirent Communications plc |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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