Correlation Between Nufarm and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Nufarm 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 Nufarm and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and Eastman Chemical, you can compare the effects of market volatilities on Nufarm 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 Nufarm with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Eastman Chemical.
Diversification Opportunities for Nufarm and Eastman Chemical
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nufarm and Eastman is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Nufarm 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 Nufarm Limited 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 Nufarm i.e., Nufarm and Eastman Chemical go up and down completely randomly.
Pair Corralation between Nufarm and Eastman Chemical
Assuming the 90 days horizon Nufarm is expected to generate 1.2 times less return on investment than Eastman Chemical. In addition to that, Nufarm is 1.08 times more volatile than Eastman Chemical. It trades about 0.1 of its total potential returns per unit of risk. Eastman Chemical is currently generating about 0.13 per unit of volatility. If you would invest 8,906 in Eastman Chemical on November 28, 2024 and sell it today you would earn a total of 420.00 from holding Eastman Chemical or generate 4.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. Eastman Chemical
Performance |
| Timeline |
| Nufarm Limited |
| Eastman Chemical |
Nufarm and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and Eastman Chemical
The main advantage of trading using opposite Nufarm and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm 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.| Nufarm vs. Cleanaway Waste Management | Nufarm vs. CALTAGIRONE EDITORE | Nufarm vs. CSSC Offshore Marine | Nufarm vs. CVW CLEANTECH INC |
| Eastman Chemical vs. CALTAGIRONE EDITORE | Eastman Chemical vs. USWE SPORTS AB | Eastman Chemical vs. KOBE STEEL LTD | Eastman Chemical vs. Sch Environnement SA |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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