Correlation Between Nasdaq and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Eastman Chemical, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Eastman Chemical.
Diversification Opportunities for Nasdaq and Eastman Chemical
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nasdaq and Eastman is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Eastman Chemical go up and down completely randomly.
Pair Corralation between Nasdaq and Eastman Chemical
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.86 times more return on investment than Eastman Chemical. However, Nasdaq Inc is 1.16 times less risky than Eastman Chemical. It trades about 0.05 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.04 per unit of risk. If you would invest 6,323 in Nasdaq Inc on September 3, 2024 and sell it today you would earn a total of 1,976 from holding Nasdaq Inc or generate 31.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Eastman Chemical
Performance |
| Timeline |
| Nasdaq Inc |
| Eastman Chemical |
Nasdaq and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Eastman Chemical
The main advantage of trading using opposite Nasdaq and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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. SPACE | Eastman Chemical vs. Bayview Acquisition Corp | Eastman Chemical vs. T Rowe Price | Eastman Chemical vs. Ampleforth |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |