Correlation Between Eastman Chemical and China Coal
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and China Coal 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 China Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and China Coal Energy, you can compare the effects of market volatilities on Eastman Chemical and China Coal 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 China Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and China Coal.
Diversification Opportunities for Eastman Chemical and China Coal
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eastman and China is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy 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 China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and China Coal go up and down completely randomly.
Pair Corralation between Eastman Chemical and China Coal
Assuming the 90 days horizon Eastman Chemical is expected to generate 4.48 times less return on investment than China Coal. But when comparing it to its historical volatility, Eastman Chemical is 2.66 times less risky than China Coal. It trades about 0.06 of its potential returns per unit of risk. China Coal Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 52.00 in China Coal Energy on September 14, 2024 and sell it today you would earn a total of 66.00 from holding China Coal Energy or generate 126.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Eastman Chemical vs. China Coal Energy
Performance |
| Timeline |
| Eastman Chemical |
| China Coal Energy |
Eastman Chemical and China Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and China Coal
The main advantage of trading using opposite Eastman Chemical and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, China Coal 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 China Coal will offset losses from the drop in China Coal's long position.| Eastman Chemical vs. SMA Solar Technology | Eastman Chemical vs. AECOM TECHNOLOGY | Eastman Chemical vs. Cogent Communications Holdings | Eastman Chemical vs. Ribbon Communications |
| China Coal vs. SPORTING | China Coal vs. Charter Communications | China Coal vs. Verizon Communications | China Coal vs. Iridium Communications |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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