Correlation Between Eastman Chemical and X FAB
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and X FAB 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 X FAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and X FAB Silicon Foundries, you can compare the effects of market volatilities on Eastman Chemical and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and X FAB.
Diversification Opportunities for Eastman Chemical and X FAB
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Eastman and XFB is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and X FAB go up and down completely randomly.
Pair Corralation between Eastman Chemical and X FAB
Assuming the 90 days horizon Eastman Chemical is expected to generate 0.55 times more return on investment than X FAB. However, Eastman Chemical is 1.83 times less risky than X FAB. It trades about 0.07 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.09 per unit of risk. If you would invest 8,784 in Eastman Chemical on September 3, 2024 and sell it today you would earn a total of 1,088 from holding Eastman Chemical or generate 12.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Eastman Chemical |
| X FAB Silicon |
Eastman Chemical and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and X FAB
The main advantage of trading using opposite Eastman Chemical and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB's long position.| Eastman Chemical vs. Vulcan Materials | Eastman Chemical vs. Broadwind | Eastman Chemical vs. Transportadora de Gas | Eastman Chemical vs. URBAN OUTFITTERS |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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