Correlation Between Eastman Chemical and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Sensient Technologies 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 Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Sensient Technologies, you can compare the effects of market volatilities on Eastman Chemical and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Sensient Technologies.
Diversification Opportunities for Eastman Chemical and Sensient Technologies
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eastman and Sensient is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Sensient Technologies go up and down completely randomly.
Pair Corralation between Eastman Chemical and Sensient Technologies
Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Sensient Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.02 times less risky than Sensient Technologies. The stock trades about -0.17 of its potential returns per unit of risk. The Sensient Technologies is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 7,708 in Sensient Technologies on October 19, 2024 and sell it today you would lose (336.00) from holding Sensient Technologies or give up 4.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Sensient Technologies
Performance |
| Timeline |
| Eastman Chemical |
| Sensient Technologies |
Eastman Chemical and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Sensient Technologies
The main advantage of trading using opposite Eastman Chemical and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' 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 |
| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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