Correlation Between Eastman Chemical and New Residential

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

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

Diversification Opportunities for Eastman Chemical and New Residential

-0.47

Correlation Coefficient

Eastman Chemical  New Residential

Very good diversification

The 3 months correlation between Eastman and New is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 Co are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and New Residential go up and down completely randomly.

Pair Corralation between Eastman Chemical and New Residential

Assuming the 90 days trading horizon Eastman Chemical is expected to generate 1.66 times less return on investment than New Residential. But when comparing it to its historical volatility, Eastman Chemical Co is 1.18 times less risky than New Residential. It trades about 0.03 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  967.00  in New Residential Investment on October 9, 2024 and sell it today you would earn a total of  132.00  from holding New Residential Investment or generate 13.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.0%
Values	Daily Returns

Eastman Chemical Co  vs.  New Residential Investment

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

New Residential Inve

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eastman Chemical and New Residential

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

The idea behind Eastman Chemical Co and New Residential Investment 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.