Correlation Between PPG Industries and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both PPG 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 PPG 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 PPG Industries and Eastman Chemical, you can compare the effects of market volatilities on PPG 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 PPG Industries with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPG Industries and Eastman Chemical.
Diversification Opportunities for PPG Industries and Eastman Chemical
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PPG and Eastman is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PPG Industries and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and PPG 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 PPG Industries 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 PPG Industries i.e., PPG Industries and Eastman Chemical go up and down completely randomly.
Pair Corralation between PPG Industries and Eastman Chemical
Considering the 90-day investment horizon PPG Industries is expected to generate 0.83 times more return on investment than Eastman Chemical. However, PPG Industries is 1.21 times less risky than Eastman Chemical. It trades about -0.06 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.15 per unit of risk. If you would invest 13,003 in PPG Industries on October 31, 2024 and sell it today you would lose (702.00) from holding PPG Industries or give up 5.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PPG Industries vs. Eastman Chemical
Performance |
| Timeline |
| PPG Industries |
| Eastman Chemical |
PPG Industries and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PPG Industries and Eastman Chemical
The main advantage of trading using opposite PPG Industries and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPG 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.| PPG Industries vs. Air Products and | PPG Industries vs. Linde plc Ordinary | PPG Industries vs. Ecolab Inc | PPG Industries vs. LyondellBasell Industries NV |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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