Correlation Between LyondellBasell Industries and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both LyondellBasell Industries 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 LyondellBasell Industries and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LyondellBasell Industries NV and Eastman Chemical, you can compare the effects of market volatilities on LyondellBasell Industries 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 LyondellBasell Industries with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LyondellBasell Industries and Eastman Chemical.
Diversification Opportunities for LyondellBasell Industries and Eastman Chemical
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LyondellBasell and Eastman is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and LyondellBasell Industries 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 LyondellBasell Industries NV 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 LyondellBasell Industries i.e., LyondellBasell Industries and Eastman Chemical go up and down completely randomly.
Pair Corralation between LyondellBasell Industries and Eastman Chemical
Considering the 90-day investment horizon LyondellBasell Industries NV is expected to generate 0.81 times more return on investment than Eastman Chemical. However, LyondellBasell Industries NV is 1.24 times less risky than Eastman Chemical. It trades about 0.25 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.06 per unit of risk. If you would invest 7,318 in LyondellBasell Industries NV on October 29, 2024 and sell it today you would earn a total of 418.00 from holding LyondellBasell Industries NV or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
LyondellBasell Industries NV vs. Eastman Chemical
Performance |
| Timeline |
| LyondellBasell Industries |
| Eastman Chemical |
LyondellBasell Industries and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LyondellBasell Industries and Eastman Chemical
The main advantage of trading using opposite LyondellBasell Industries and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LyondellBasell Industries 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.| LyondellBasell Industries vs. International Flavors Fragrances | LyondellBasell Industries vs. Cabot | LyondellBasell Industries vs. Westlake Chemical | LyondellBasell Industries vs. Air Products and |
| Eastman Chemical vs. Air Products and | Eastman Chemical vs. International Flavors Fragrances | Eastman Chemical vs. Sherwin Williams Co | Eastman Chemical vs. PPG Industries |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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