Correlation Between Eastman Chemical and Cars
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Cars 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 Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Cars Inc, you can compare the effects of market volatilities on Eastman Chemical and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Cars.
Diversification Opportunities for Eastman Chemical and Cars
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eastman and Cars is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Cars go up and down completely randomly.
Pair Corralation between Eastman Chemical and Cars
Considering the 90-day investment horizon Eastman Chemical is expected to generate 1.68 times less return on investment than Cars. But when comparing it to its historical volatility, Eastman Chemical is 1.47 times less risky than Cars. It trades about 0.04 of its potential returns per unit of risk. Cars Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,386 in Cars Inc on August 31, 2024 and sell it today you would earn a total of 601.00 from holding Cars Inc or generate 43.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Cars Inc
Performance |
| Timeline |
| Eastman Chemical |
| Cars Inc |
Eastman Chemical and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Cars
The main advantage of trading using opposite Eastman Chemical and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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