Correlation Between Eastman Chemical and Air Products

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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

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Eastman and Air Products is 0.26. 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 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 And 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 1.26 times more return on investment than Air Products. However, Eastman Chemical is 1.26 times more volatile than Air Products And. It trades about 0.06 of its potential returns per unit of risk. Air Products And is currently generating about 0.01 per unit of risk. If you would invest  6,469  in Eastman Chemical on February 17, 2022 and sell it today you would earn a total of  4,221  from holding Eastman Chemical or generate 65.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Eastman Chemical  vs.  Air Products And

 Performance (%) 
      Timeline 
Eastman Chemical 
Eastman Performance
0 of 100
Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Eastman Price Channel

Air Products And 
Air Products Performance
0 of 100
Over the last 90 days Air Products And has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Products Price Channel

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.
The idea behind Eastman Chemical and Air Products And 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.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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