Correlation Between REX American and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both REX American 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 REX American and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REX American Resources and Eastman Chemical, you can compare the effects of market volatilities on REX American 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 REX American with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of REX American and Eastman Chemical.
Diversification Opportunities for REX American and Eastman Chemical
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between REX and Eastman is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding REX American Resources and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and REX American 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 REX American Resources 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 REX American i.e., REX American and Eastman Chemical go up and down completely randomly.
Pair Corralation between REX American and Eastman Chemical
Considering the 90-day investment horizon REX American Resources is expected to under-perform the Eastman Chemical. In addition to that, REX American is 1.44 times more volatile than Eastman Chemical. It trades about -0.06 of its total potential returns per unit of risk. Eastman Chemical is currently generating about -0.01 per unit of volatility. If you would invest 10,499 in Eastman Chemical on August 31, 2024 and sell it today you would lose (76.00) from holding Eastman Chemical or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REX American Resources vs. Eastman Chemical
Performance |
| Timeline |
| REX American Resources |
| Eastman Chemical |
REX American and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REX American and Eastman Chemical
The main advantage of trading using opposite REX American and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REX American 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.| REX American vs. Innospec | REX American vs. H B Fuller | REX American vs. Quaker Chemical | REX American vs. Minerals Technologies |
| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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