Correlation Between London Security and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both London Security 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 London Security and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and Eastman Chemical Co, you can compare the effects of market volatilities on London Security 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 London Security with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Eastman Chemical.
Diversification Opportunities for London Security and Eastman Chemical
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between London and Eastman is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and London Security 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 London Security Plc 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 London Security i.e., London Security and Eastman Chemical go up and down completely randomly.
Pair Corralation between London Security and Eastman Chemical
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.88 times more return on investment than Eastman Chemical. However, London Security Plc is 1.14 times less risky than Eastman Chemical. It trades about 0.06 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about 0.05 per unit of risk. If you would invest 294,207 in London Security Plc on September 3, 2024 and sell it today you would earn a total of 30,793 from holding London Security Plc or generate 10.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.09% |
| Values | Daily Returns |
London Security Plc vs. Eastman Chemical Co
Performance |
| Timeline |
| London Security Plc |
| Eastman Chemical |
London Security and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Eastman Chemical
The main advantage of trading using opposite London Security and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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.| London Security vs. Griffin Mining | London Security vs. Lundin Mining Corp | London Security vs. Veolia Environnement VE | London Security vs. Caledonia Mining |
| Eastman Chemical vs. Live Nation Entertainment | Eastman Chemical vs. Wyndham Hotels Resorts | Eastman Chemical vs. Scandic Hotels Group | Eastman Chemical vs. Centaur Media |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |