Correlation Between Eastman Chemical and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and NIPPON STEEL 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 NIPPON STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and NIPPON STEEL SPADR, you can compare the effects of market volatilities on Eastman Chemical and NIPPON STEEL 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 NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and NIPPON STEEL.
Diversification Opportunities for Eastman Chemical and NIPPON STEEL
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Eastman and NIPPON is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR 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 NIPPON STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON STEEL SPADR has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and NIPPON STEEL go up and down completely randomly.
Pair Corralation between Eastman Chemical and NIPPON STEEL
Assuming the 90 days horizon Eastman Chemical is expected to generate 5.76 times less return on investment than NIPPON STEEL. But when comparing it to its historical volatility, Eastman Chemical is 6.41 times less risky than NIPPON STEEL. It trades about 0.04 of its potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 465.00 in NIPPON STEEL SPADR on September 3, 2024 and sell it today you would earn a total of 150.00 from holding NIPPON STEEL SPADR or generate 32.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| Eastman Chemical |
| NIPPON STEEL SPADR |
Eastman Chemical and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and NIPPON STEEL
The main advantage of trading using opposite Eastman Chemical and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, NIPPON STEEL 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 NIPPON STEEL will offset losses from the drop in NIPPON STEEL's long position.| Eastman Chemical vs. Vulcan Materials | Eastman Chemical vs. Broadwind | Eastman Chemical vs. Transportadora de Gas | Eastman Chemical vs. URBAN OUTFITTERS |
| NIPPON STEEL vs. UNITED RENTALS | NIPPON STEEL vs. PARKEN Sport Entertainment | NIPPON STEEL vs. ADRIATIC METALS LS 013355 | NIPPON STEEL vs. Eastman Chemical |
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 CEOs Directory module to screen CEOs from public companies around the world.
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