Correlation Between Eastman Chemical and Air Products
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Air Products 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 Eastman Chemical and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Air Products and, you can compare the effects of market volatilities on Eastman Chemical and Air Products 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 Eastman Chemical with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Air Products.
Diversification Opportunities for Eastman Chemical and Air Products
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Eastman and Air is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Eastman Chemical 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 Eastman Chemical are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Air Products go up and down completely randomly.
Pair Corralation between Eastman Chemical and Air Products
Considering the 90-day investment horizon Eastman Chemical is expected to generate 1.31 times more return on investment than Air Products. However, Eastman Chemical is 1.31 times more volatile than Air Products and. It trades about 0.09 of its potential returns per unit of risk. Air Products and is currently generating about -0.07 per unit of risk. If you would invest 9,367 in Eastman Chemical on January 20, 2024 and sell it today you would earn a total of 235.00 from holding Eastman Chemical or generate 2.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. Air Products and
Performance |
| Timeline |
| Eastman Chemical |
| Air Products |
Eastman Chemical and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and Air Products
The main advantage of trading using opposite Eastman Chemical and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
| Air Products vs. PPG Industries | Air Products vs. Sherwin Williams Co | Air Products vs. Ecolab Inc | Air Products vs. Albemarle Corp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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