Correlation Between Eastman Chemical and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Boston Beer 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 Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Boston Beer, you can compare the effects of market volatilities on Eastman Chemical and Boston Beer 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 Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Boston Beer.
Diversification Opportunities for Eastman Chemical and Boston Beer
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eastman and Boston is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Boston Beer go up and down completely randomly.
Pair Corralation between Eastman Chemical and Boston Beer
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.59 times more return on investment than Boston Beer. However, Eastman Chemical is 1.7 times less risky than Boston Beer. It trades about 0.04 of its potential returns per unit of risk. Boston Beer is currently generating about -0.01 per unit of risk. If you would invest 8,664 in Eastman Chemical on September 14, 2024 and sell it today you would earn a total of 1,162 from holding Eastman Chemical or generate 13.41% 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. Boston Beer
Performance |
| Timeline |
| Eastman Chemical |
| Boston Beer |
Eastman Chemical and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Boston Beer
The main advantage of trading using opposite Eastman Chemical and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
| Boston Beer vs. Fomento Economico Mexicano | Boston Beer vs. Carlsberg AS | Boston Beer vs. Compania Cervecerias Unidas | Boston Beer vs. Molson Coors Beverage |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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