Correlation Between Eastman Chemical and Air Liquide

Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Air Liquide 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 Liquide 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 Liquide SA, you can compare the effects of market volatilities on Eastman Chemical and Air Liquide 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 Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Air Liquide.

Diversification Opportunities for Eastman Chemical and Air Liquide

0.65

Correlation Coefficient

Eastman Chemical  Air Liquide

Poor diversification

The 3 months correlation between Eastman and Air is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA 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 Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Air Liquide go up and down completely randomly.

Pair Corralation between Eastman Chemical and Air Liquide

Considering the 90-day investment horizon Eastman Chemical is expected to generate 1.2 times more return on investment than Air Liquide. However, Eastman Chemical is 1.2 times more volatile than Air Liquide SA. It trades about -0.1 of its potential returns per unit of risk. Air Liquide SA is currently generating about -0.18 per unit of risk. If you would invest  9,926  in Eastman Chemical on January 24, 2024 and sell it today you would lose (220.00) from holding Eastman Chemical or give up 2.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Eastman Chemical  vs.  Air Liquide SA

Eastman Chemical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Eastman Chemical displayed solid returns over the last few months and may actually be approaching a breakup point.

Air Liquide SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Air Liquide may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Eastman Chemical and Air Liquide

The main advantage of trading using opposite Eastman Chemical and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Air Liquide 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 Liquide will offset losses from the drop in Air Liquide's long position.

The idea behind Eastman Chemical and Air Liquide SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..