Correlation Between Westlake Chemical and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical and Eastman Chemical 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 Westlake Chemical and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and Eastman Chemical, you can compare the effects of market volatilities on Westlake Chemical and Eastman Chemical 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 Westlake Chemical with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Eastman Chemical.
Diversification Opportunities for Westlake Chemical and Eastman Chemical
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Westlake and Eastman is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Westlake 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 Westlake Chemical are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Westlake Chemical i.e., Westlake Chemical and Eastman Chemical go up and down completely randomly.
Pair Corralation between Westlake Chemical and Eastman Chemical
Considering the 90-day investment horizon Westlake Chemical is expected to generate 1.12 times more return on investment than Eastman Chemical. However, Westlake Chemical is 1.12 times more volatile than Eastman Chemical. It trades about 0.12 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.13 per unit of risk. If you would invest 14,123 in Westlake Chemical on March 8, 2024 and sell it today you would earn a total of 1,528 from holding Westlake Chemical or generate 10.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Westlake Chemical vs. Eastman Chemical
Performance |
Timeline |
Westlake Chemical |
Eastman Chemical |
Westlake Chemical and Eastman Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Westlake Chemical and Eastman Chemical
The main advantage of trading using opposite Westlake Chemical and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical position performs unexpectedly, Eastman Chemical 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 Chemical will offset losses from the drop in Eastman Chemical's long position.Westlake Chemical vs. Eastman Chemical | Westlake Chemical vs. Ecolab Inc | Westlake Chemical vs. Malaga Financial | Westlake Chemical vs. LiCycle Holdings Corp |
Eastman Chemical vs. Ecolab Inc | Eastman Chemical vs. Malaga Financial | Eastman Chemical vs. LiCycle Holdings Corp | Eastman Chemical vs. SEI Investments |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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