Correlation Between Select Energy and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Select Energy 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 Select Energy and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Energy Services and Eastman Chemical, you can compare the effects of market volatilities on Select Energy 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 Select Energy with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Energy and Eastman Chemical.
Diversification Opportunities for Select Energy and Eastman Chemical
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Select and Eastman is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Select Energy 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 Select Energy Services 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 Select Energy i.e., Select Energy and Eastman Chemical go up and down completely randomly.
Pair Corralation between Select Energy and Eastman Chemical
Given the investment horizon of 90 days Select Energy Services is expected to generate 1.2 times more return on investment than Eastman Chemical. However, Select Energy is 1.2 times more volatile than Eastman Chemical. It trades about 0.39 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.14 per unit of risk. If you would invest 1,245 in Select Energy Services on October 20, 2024 and sell it today you would earn a total of 160.00 from holding Select Energy Services or generate 12.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Select Energy Services vs. Eastman Chemical
Performance |
Timeline |
Select Energy Services |
Eastman Chemical |
Select Energy and Eastman Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Select Energy and Eastman Chemical
The main advantage of trading using opposite Select Energy and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Energy 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.Select Energy vs. Orion Engineered Carbons | Select Energy vs. Element Solutions | Select Energy vs. Kronos Worldwide | Select Energy vs. FutureFuel Corp |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Stocks Directory Find actively traded stocks across global markets |