Correlation Between Eastman Chemical and PPG Industries
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and PPG 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 PPG 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 PPG Industries, you can compare the effects of market volatilities on Eastman Chemical and PPG 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 PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and PPG Industries.
Diversification Opportunities for Eastman Chemical and PPG Industries
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastman and PPG is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and PPG Industries go up and down completely randomly.
Pair Corralation between Eastman Chemical and PPG Industries
Considering the 90-day investment horizon Eastman Chemical is expected to generate 1.33 times more return on investment than PPG Industries. However, Eastman Chemical is 1.33 times more volatile than PPG Industries. It trades about 0.03 of its potential returns per unit of risk. PPG Industries is currently generating about -0.02 per unit of risk. If you would invest 9,913 in Eastman Chemical on August 24, 2024 and sell it today you would earn a total of 447.00 from holding Eastman Chemical or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. PPG Industries
Performance |
| Timeline |
| Eastman Chemical |
| PPG Industries |
Eastman Chemical and PPG Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and PPG Industries
The main advantage of trading using opposite Eastman Chemical and PPG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, PPG 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 PPG Industries will offset losses from the drop in PPG Industries' 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 |
| PPG Industries vs. Air Products and | PPG Industries vs. Linde plc Ordinary | PPG Industries vs. Ecolab Inc | PPG Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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