Correlation Between Eastman Chemical and Aluminumof China
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Aluminumof China 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 Aluminumof China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Aluminum of, you can compare the effects of market volatilities on Eastman Chemical and Aluminumof China 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 Aluminumof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Aluminumof China.
Diversification Opportunities for Eastman Chemical and Aluminumof China
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eastman and Aluminumof is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China 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 Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Aluminumof China go up and down completely randomly.
Pair Corralation between Eastman Chemical and Aluminumof China
Assuming the 90 days horizon Eastman Chemical is expected to generate 2.5 times less return on investment than Aluminumof China. But when comparing it to its historical volatility, Eastman Chemical is 2.96 times less risky than Aluminumof China. It trades about 0.12 of its potential returns per unit of risk. Aluminum of is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 45.00 in Aluminum of on September 4, 2024 and sell it today you would earn a total of 11.00 from holding Aluminum of or generate 24.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
Eastman Chemical vs. Aluminum of
Performance |
| Timeline |
| Eastman Chemical |
| Aluminumof China |
Eastman Chemical and Aluminumof China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Aluminumof China
The main advantage of trading using opposite Eastman Chemical and Aluminumof China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Aluminumof China 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 Aluminumof China will offset losses from the drop in Aluminumof China's long position.| Eastman Chemical vs. AIR LIQUIDE ADR | Eastman Chemical vs. BASF SE | Eastman Chemical vs. BASF SE | Eastman Chemical vs. BASF SE |
| Aluminumof China vs. FIREWEED METALS P | Aluminumof China vs. Lion One Metals | Aluminumof China vs. Kaiser Aluminum | Aluminumof China vs. Ultra Clean Holdings |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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