Correlation Between Eastman Chemical and BW LPG
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and BW LPG 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 BW LPG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and BW LPG Limited, you can compare the effects of market volatilities on Eastman Chemical and BW LPG 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 BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and BW LPG.
Diversification Opportunities for Eastman Chemical and BW LPG
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eastman and BWLP is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited 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 BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and BW LPG go up and down completely randomly.
Pair Corralation between Eastman Chemical and BW LPG
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.57 times more return on investment than BW LPG. However, Eastman Chemical is 1.75 times less risky than BW LPG. It trades about 0.0 of its potential returns per unit of risk. BW LPG Limited is currently generating about -0.05 per unit of risk. If you would invest 9,642 in Eastman Chemical on December 4, 2024 and sell it today you would lose (196.00) from holding Eastman Chemical or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. BW LPG Limited
Performance |
| Timeline |
| Eastman Chemical |
| BW LPG Limited |
Eastman Chemical and BW LPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and BW LPG
The main advantage of trading using opposite Eastman Chemical and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, BW LPG 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 BW LPG will offset losses from the drop in BW LPG'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 |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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