Correlation Between Eastman Chemical and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Volkswagen 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 Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Volkswagen AG, you can compare the effects of market volatilities on Eastman Chemical and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Volkswagen.
Diversification Opportunities for Eastman Chemical and Volkswagen
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Eastman and Volkswagen is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Volkswagen go up and down completely randomly.
Pair Corralation between Eastman Chemical and Volkswagen
Assuming the 90 days horizon Eastman Chemical is expected to generate 0.91 times more return on investment than Volkswagen. However, Eastman Chemical is 1.09 times less risky than Volkswagen. It trades about 0.04 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.04 per unit of risk. If you would invest 6,963 in Eastman Chemical on September 19, 2024 and sell it today you would earn a total of 2,287 from holding Eastman Chemical or generate 32.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Volkswagen AG
Performance |
| Timeline |
| Eastman Chemical |
| Volkswagen AG |
Eastman Chemical and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Volkswagen
The main advantage of trading using opposite Eastman Chemical and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| Eastman Chemical vs. BLUESCOPE STEEL | Eastman Chemical vs. KRAKATAU STEEL B | Eastman Chemical vs. Carsales | Eastman Chemical vs. NIPPON STEEL SPADR |
| Volkswagen vs. AIR PRODCHEMICALS | Volkswagen vs. HEMISPHERE EGY | Volkswagen vs. China BlueChemical | Volkswagen 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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