Correlation Between Eastman Chemical and NewMarket
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and NewMarket 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 NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and NewMarket, you can compare the effects of market volatilities on Eastman Chemical and NewMarket 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 NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and NewMarket.
Diversification Opportunities for Eastman Chemical and NewMarket
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eastman and NewMarket is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket 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 NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and NewMarket go up and down completely randomly.
Pair Corralation between Eastman Chemical and NewMarket
Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the NewMarket. In addition to that, Eastman Chemical is 1.08 times more volatile than NewMarket. It trades about -0.01 of its total potential returns per unit of risk. NewMarket is currently generating about 0.05 per unit of volatility. If you would invest 53,705 in NewMarket on August 27, 2024 and sell it today you would earn a total of 736.00 from holding NewMarket or generate 1.37% 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. NewMarket
Performance |
| Timeline |
| Eastman Chemical |
| NewMarket |
Eastman Chemical and NewMarket Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and NewMarket
The main advantage of trading using opposite Eastman Chemical and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, NewMarket 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 NewMarket will offset losses from the drop in NewMarket's long position.| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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