Correlation Between Sterling Construction and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Sterling Construction 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 Sterling Construction and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Eastman Chemical, you can compare the effects of market volatilities on Sterling Construction 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 Sterling Construction with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Eastman Chemical.
Diversification Opportunities for Sterling Construction and Eastman Chemical
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sterling and Eastman is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and Eastman Chemical go up and down completely randomly.
Pair Corralation between Sterling Construction and Eastman Chemical
Assuming the 90 days horizon Sterling Construction is expected to under-perform the Eastman Chemical. In addition to that, Sterling Construction is 3.7 times more volatile than Eastman Chemical. It trades about -0.29 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Eastman Chemical
Performance |
| Timeline |
| Sterling Construction |
| Eastman Chemical |
Sterling Construction and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Eastman Chemical
The main advantage of trading using opposite Sterling Construction and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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.| Sterling Construction vs. PARKEN SPORT ENT | Sterling Construction vs. Corporate Travel Management | Sterling Construction vs. Yuexiu Transport Infrastructure | Sterling Construction vs. CEOTRONICS |
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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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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