Correlation Between 00108WAF7 and EASTMAN

Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and EASTMAN 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 00108WAF7 and EASTMAN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEP TEX INC and EASTMAN CHEM 45, you can compare the effects of market volatilities on 00108WAF7 and EASTMAN 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 00108WAF7 with a short position of EASTMAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and EASTMAN.

Diversification Opportunities for 00108WAF7 and EASTMAN

-0.04

Correlation Coefficient

00108WAF7  EASTMAN

Good diversification

The 3 months correlation between 00108WAF7 and EASTMAN is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and EASTMAN CHEM 45 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EASTMAN CHEM 45 and 00108WAF7 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 AEP TEX INC are associated (or correlated) with EASTMAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EASTMAN CHEM 45 has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and EASTMAN go up and down completely randomly.

Pair Corralation between 00108WAF7 and EASTMAN

Assuming the 90 days trading horizon 00108WAF7 is expected to generate 1.03 times less return on investment than EASTMAN. In addition to that, 00108WAF7 is 4.42 times more volatile than EASTMAN CHEM 45. It trades about 0.01 of its total potential returns per unit of risk. EASTMAN CHEM 45 is currently generating about 0.06 per unit of volatility. If you would invest  9,756  in EASTMAN CHEM 45 on March 5, 2024 and sell it today you would earn a total of  232.00  from holding EASTMAN CHEM 45 or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.57%
Values	Daily Returns

AEP TEX INC  vs.  EASTMAN CHEM 45

AEP TEX INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEP TEX INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 00108WAF7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EASTMAN CHEM 45

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EASTMAN CHEM 45 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, EASTMAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 00108WAF7 and EASTMAN

The main advantage of trading using opposite 00108WAF7 and EASTMAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 position performs unexpectedly, EASTMAN 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 EASTMAN will offset losses from the drop in EASTMAN's long position.

The idea behind AEP TEX INC and EASTMAN CHEM 45 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.