Correlation Between Eastman Chemical and American Airlines
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and American Airlines Group, you can compare the effects of market volatilities on Eastman Chemical and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and American Airlines.
Diversification Opportunities for Eastman Chemical and American Airlines
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eastman and American is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and American Airlines go up and down completely randomly.
Pair Corralation between Eastman Chemical and American Airlines
Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.54 times more return on investment than American Airlines. However, Eastman Chemical is 1.86 times less risky than American Airlines. It trades about 0.13 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.03 per unit of risk. If you would invest 8,663 in Eastman Chemical on January 21, 2024 and sell it today you would earn a total of 979.00 from holding Eastman Chemical or generate 11.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastman Chemical vs. American Airlines Group
Performance |
| Timeline |
| Eastman Chemical |
| American Airlines |
Eastman Chemical and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastman Chemical and American Airlines
The main advantage of trading using opposite Eastman Chemical and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Eastman Chemical vs. Air Products and | Eastman Chemical vs. International Flavors Fragrances | Eastman Chemical vs. Sherwin Williams Co | Eastman Chemical vs. PPG Industries |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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