Correlation Between Eastman Chemical and Walmart

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

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

Diversification Opportunities for Eastman Chemical and Walmart

-0.52

Correlation Coefficient

Eastman Chemical  Walmart

Excellent diversification

The 3 months correlation between Eastman and Walmart is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Walmart go up and down completely randomly.

Pair Corralation between Eastman Chemical and Walmart

Assuming the 90 days horizon Eastman Chemical is expected to under-perform the Walmart. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.06 times less risky than Walmart. The stock trades about -0.58 of its potential returns per unit of risk. The Walmart is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,788  in Walmart on October 1, 2024 and sell it today you would earn a total of  6.00  from holding Walmart or generate 0.07% 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.  Walmart

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Walmart

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and Walmart

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

The idea behind Eastman Chemical and Walmart 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.