Correlation Between Eastman Chemical and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Arm Holdings 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 Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Arm Holdings plc, you can compare the effects of market volatilities on Eastman Chemical and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Arm Holdings.
Diversification Opportunities for Eastman Chemical and Arm Holdings
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastman and Arm is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Arm Holdings go up and down completely randomly.
Pair Corralation between Eastman Chemical and Arm Holdings
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.51 times more return on investment than Arm Holdings. However, Eastman Chemical is 1.98 times less risky than Arm Holdings. It trades about -0.01 of its potential returns per unit of risk. Arm Holdings plc is currently generating about -0.09 per unit of risk. If you would invest 10,670 in Eastman Chemical on August 27, 2024 and sell it today you would lose (86.00) from holding Eastman Chemical or give up 0.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Arm Holdings plc
Performance |
| Timeline |
| Eastman Chemical |
| Arm Holdings plc |
Eastman Chemical and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Arm Holdings
The main advantage of trading using opposite Eastman Chemical and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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