Correlation Between Eastman Chemical and Boyd Gaming

Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Boyd Gaming 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 Boyd Gaming into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastman Chemical and Boyd Gaming, you can compare the effects of market volatilities on Eastman Chemical and Boyd Gaming 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 Boyd Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Boyd Gaming.

Diversification Opportunities for Eastman Chemical and Boyd Gaming

-0.04

Correlation Coefficient

Eastman Chemical  Boyd Gaming

Good diversification

The 3 months correlation between Eastman and Boyd is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming 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 Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Boyd Gaming go up and down completely randomly.

Pair Corralation between Eastman Chemical and Boyd Gaming

Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.34 times more return on investment than Boyd Gaming. However, Eastman Chemical is 2.95 times less risky than Boyd Gaming. It trades about -0.09 of its potential returns per unit of risk. Boyd Gaming is currently generating about -0.25 per unit of risk. If you would invest  9,983  in Eastman Chemical on February 5, 2024 and sell it today you would lose (233.00) from holding Eastman Chemical or give up 2.33% of portfolio value over 90 days.

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

Eastman Chemical  vs.  Boyd Gaming

Eastman Chemical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 17 (%) 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.

Boyd Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Eastman Chemical and Boyd Gaming

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

The idea behind Eastman Chemical and Boyd Gaming 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.