Correlation Between Boston Beer and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Boston Beer 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 Boston Beer and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Eastman Chemical, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Eastman Chemical.
Diversification Opportunities for Boston Beer and Eastman Chemical
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Boston and Eastman is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Eastman Chemical go up and down completely randomly.
Pair Corralation between Boston Beer and Eastman Chemical
Considering the 90-day investment horizon Boston Beer is expected to under-perform the Eastman Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.04 times less risky than Eastman Chemical. The stock trades about -0.1 of its potential returns per unit of risk. The Eastman Chemical is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 10,077 in Eastman Chemical on September 14, 2024 and sell it today you would lose (251.00) from holding Eastman Chemical or give up 2.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Eastman Chemical
Performance |
| Timeline |
| Boston Beer |
| Eastman Chemical |
Boston Beer and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Eastman Chemical
The main advantage of trading using opposite Boston Beer and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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.| Boston Beer vs. Fomento Economico Mexicano | Boston Beer vs. Carlsberg AS | Boston Beer vs. Compania Cervecerias Unidas | Boston Beer vs. Molson Coors Beverage |
| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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