Correlation Between H B and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both H B and Eastman Chemical 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 H B and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H B Fuller and Eastman Chemical, you can compare the effects of market volatilities on H B and Eastman Chemical 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 H B with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of H B and Eastman Chemical.
Diversification Opportunities for H B and Eastman Chemical
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between FUL and Eastman is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and H B 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 H B Fuller are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of H B i.e., H B and Eastman Chemical go up and down completely randomly.
Pair Corralation between H B and Eastman Chemical
Considering the 90-day investment horizon H B is expected to generate 2.42 times less return on investment than Eastman Chemical. But when comparing it to its historical volatility, H B Fuller is 1.02 times less risky than Eastman Chemical. It trades about 0.02 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8,444 in Eastman Chemical on August 27, 2024 and sell it today you would earn a total of 2,115 from holding Eastman Chemical or generate 25.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
H B Fuller vs. Eastman Chemical
Performance |
| Timeline |
| H B Fuller |
| Eastman Chemical |
H B and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with H B and Eastman Chemical
The main advantage of trading using opposite H B and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H B position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.The idea behind H B Fuller and Eastman Chemical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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