Correlation Between Eastman Chemical and LyondellBasell Industries
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and LyondellBasell Industries 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 LyondellBasell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and LyondellBasell Industries NV, you can compare the effects of market volatilities on Eastman Chemical and LyondellBasell Industries 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 LyondellBasell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and LyondellBasell Industries.
Diversification Opportunities for Eastman Chemical and LyondellBasell Industries
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Eastman and LyondellBasell is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries 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 LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and LyondellBasell Industries go up and down completely randomly.
Pair Corralation between Eastman Chemical and LyondellBasell Industries
Considering the 90-day investment horizon Eastman Chemical is expected to generate 1.24 times more return on investment than LyondellBasell Industries. However, Eastman Chemical is 1.24 times more volatile than LyondellBasell Industries NV. It trades about 0.04 of its potential returns per unit of risk. LyondellBasell Industries NV is currently generating about 0.02 per unit of risk. If you would invest 7,915 in Eastman Chemical on August 27, 2024 and sell it today you would earn a total of 2,644 from holding Eastman Chemical or generate 33.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. LyondellBasell Industries NV
Performance |
| Timeline |
| Eastman Chemical |
| LyondellBasell Industries |
Eastman Chemical and LyondellBasell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and LyondellBasell Industries
The main advantage of trading using opposite Eastman Chemical and LyondellBasell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, LyondellBasell Industries 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 LyondellBasell Industries will offset losses from the drop in LyondellBasell Industries' long position.| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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