Correlation Between Eastman Chemical and International Flavors
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and International Flavors 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 International Flavors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and International Flavors Fragrances, you can compare the effects of market volatilities on Eastman Chemical and International Flavors 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 International Flavors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and International Flavors.
Diversification Opportunities for Eastman Chemical and International Flavors
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Eastman and International is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and International Flavors Fragranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Flavors 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 International Flavors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Flavors has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and International Flavors go up and down completely randomly.
Pair Corralation between Eastman Chemical and International Flavors
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.56 times more return on investment than International Flavors. However, Eastman Chemical is 1.78 times less risky than International Flavors. It trades about -0.02 of its potential returns per unit of risk. International Flavors Fragrances is currently generating about -0.17 per unit of risk. If you would invest 10,670 in Eastman Chemical on August 27, 2024 and sell it today you would lose (111.00) from holding Eastman Chemical or give up 1.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. International Flavors Fragranc
Performance |
| Timeline |
| Eastman Chemical |
| International Flavors |
Eastman Chemical and International Flavors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and International Flavors
The main advantage of trading using opposite Eastman Chemical and International Flavors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, International Flavors 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 International Flavors will offset losses from the drop in International Flavors' long position.| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
| International Flavors vs. LyondellBasell Industries NV | International Flavors vs. Cabot | International Flavors vs. Westlake Chemical | International Flavors vs. Air Products and |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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