Correlation Between Eastman Chemical and Albemarle Corp
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Albemarle Corp 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 Albemarle Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Albemarle Corp, you can compare the effects of market volatilities on Eastman Chemical and Albemarle Corp 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 Albemarle Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Albemarle Corp.
Diversification Opportunities for Eastman Chemical and Albemarle Corp
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastman and Albemarle is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp 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 Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Albemarle Corp go up and down completely randomly.
Pair Corralation between Eastman Chemical and Albemarle Corp
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.42 times more return on investment than Albemarle Corp. However, Eastman Chemical is 2.41 times less risky than Albemarle Corp. It trades about 0.06 of its potential returns per unit of risk. Albemarle Corp is currently generating about -0.03 per unit of risk. If you would invest 8,347 in Eastman Chemical on November 9, 2024 and sell it today you would earn a total of 1,779 from holding Eastman Chemical or generate 21.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Albemarle Corp
Performance |
| Timeline |
| Eastman Chemical |
| Albemarle Corp |
Eastman Chemical and Albemarle Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Albemarle Corp
The main advantage of trading using opposite Eastman Chemical and Albemarle Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Albemarle Corp 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 Albemarle Corp will offset losses from the drop in Albemarle Corp's long position.| Eastman Chemical vs. Air Products and | Eastman Chemical vs. International Flavors Fragrances | Eastman Chemical vs. Sherwin Williams Co | Eastman Chemical vs. PPG Industries |
| Albemarle Corp vs. Linde plc Ordinary | Albemarle Corp vs. Air Products and | Albemarle Corp vs. Dupont De Nemours | Albemarle Corp vs. Sociedad Quimica y |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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