Correlation Between Eastman Chemical and Boeing
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Boeing 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 Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and The Boeing, you can compare the effects of market volatilities on Eastman Chemical and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Boeing.
Diversification Opportunities for Eastman Chemical and Boeing
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Eastman and Boeing is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Boeing go up and down completely randomly.
Pair Corralation between Eastman Chemical and Boeing
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.85 times more return on investment than Boeing. However, Eastman Chemical is 1.17 times less risky than Boeing. It trades about 0.06 of its potential returns per unit of risk. The Boeing is currently generating about -0.03 per unit of risk. If you would invest 7,918 in Eastman Chemical on January 19, 2024 and sell it today you would earn a total of 1,679 from holding Eastman Chemical or generate 21.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 99.6% |
Values | Daily Returns |
Eastman Chemical vs. The Boeing
Performance |
Timeline |
Eastman Chemical |
Boeing |
Eastman Chemical and Boeing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eastman Chemical and Boeing
The main advantage of trading using opposite Eastman Chemical and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.Eastman Chemical vs. Sherwin Williams Co | Eastman Chemical vs. Ecolab Inc | Eastman Chemical vs. Linde plc Ordinary | Eastman Chemical vs. RPM International |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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