Correlation Between Eastman Chemical and Seadrill
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Seadrill 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 Seadrill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Seadrill Limited, you can compare the effects of market volatilities on Eastman Chemical and Seadrill 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 Seadrill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Seadrill.
Diversification Opportunities for Eastman Chemical and Seadrill
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eastman and Seadrill is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited 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 Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Seadrill go up and down completely randomly.
Pair Corralation between Eastman Chemical and Seadrill
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.67 times more return on investment than Seadrill. However, Eastman Chemical is 1.5 times less risky than Seadrill. It trades about 0.06 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.03 per unit of risk. If you would invest 7,792 in Eastman Chemical on August 27, 2024 and sell it today you would earn a total of 2,767 from holding Eastman Chemical or generate 35.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Seadrill Limited
Performance |
| Timeline |
| Eastman Chemical |
| Seadrill Limited |
Eastman Chemical and Seadrill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Seadrill
The main advantage of trading using opposite Eastman Chemical and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Seadrill 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 Seadrill will offset losses from the drop in Seadrill's long position.| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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