Correlation Between SMA Solar and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both SMA Solar 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 SMA Solar and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and Eastman Chemical, you can compare the effects of market volatilities on SMA Solar 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 SMA Solar with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Eastman Chemical.
Diversification Opportunities for SMA Solar and Eastman Chemical
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between SMA and Eastman is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Eastman Chemical go up and down completely randomly.
Pair Corralation between SMA Solar and Eastman Chemical
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the Eastman Chemical. In addition to that, SMA Solar is 2.83 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 0.08 per unit of volatility. If you would invest 7,150 in Eastman Chemical on September 14, 2024 and sell it today you would earn a total of 2,234 from holding Eastman Chemical or generate 31.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Eastman Chemical
Performance |
| Timeline |
| SMA Solar Technology |
| Eastman Chemical |
SMA Solar and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Eastman Chemical
The main advantage of trading using opposite SMA Solar and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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.| SMA Solar vs. Sunrun Inc | SMA Solar vs. Superior Plus Corp | SMA Solar vs. SIVERS SEMICONDUCTORS AB | SMA Solar vs. Norsk Hydro ASA |
| Eastman Chemical vs. SMA Solar Technology | Eastman Chemical vs. AECOM TECHNOLOGY | Eastman Chemical vs. Cogent Communications Holdings | Eastman Chemical vs. Ribbon Communications |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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