Correlation Between Eastman Chemical and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Cebu Air 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 Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Cebu Air ADR, you can compare the effects of market volatilities on Eastman Chemical and Cebu Air 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 Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Cebu Air.
Diversification Opportunities for Eastman Chemical and Cebu Air
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Eastman and Cebu is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR 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 Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air ADR has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Cebu Air go up and down completely randomly.
Pair Corralation between Eastman Chemical and Cebu Air
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.3 times more return on investment than Cebu Air. However, Eastman Chemical is 3.28 times less risky than Cebu Air. It trades about 0.08 of its potential returns per unit of risk. Cebu Air ADR is currently generating about -0.03 per unit of risk. If you would invest 8,224 in Eastman Chemical on September 2, 2024 and sell it today you would earn a total of 2,248 from holding Eastman Chemical or generate 27.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Eastman Chemical vs. Cebu Air ADR
Performance |
| Timeline |
| Eastman Chemical |
| Cebu Air ADR |
Eastman Chemical and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Cebu Air
The main advantage of trading using opposite Eastman Chemical and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air'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 |
| Cebu Air vs. Fidus Investment Corp | Cebu Air vs. 51Talk Online Education | Cebu Air vs. Nexstar Broadcasting Group | Cebu Air vs. Evolution Gaming Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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