Correlation Between Eastman Chemical and AP Moeller

Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and AP Moeller 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 AP Moeller 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 AP Moeller Maersk AS, you can compare the effects of market volatilities on Eastman Chemical and AP Moeller 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 AP Moeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and AP Moeller.

Diversification Opportunities for Eastman Chemical and AP Moeller

0.43

Correlation Coefficient

Eastman Chemical  AP Moeller

Very weak diversification

The 3 months correlation between Eastman and 0O76 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and AP Moeller Maersk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Moeller Maersk 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 AP Moeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Moeller Maersk has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and AP Moeller go up and down completely randomly.

Pair Corralation between Eastman Chemical and AP Moeller

Assuming the 90 days trading horizon Eastman Chemical is expected to generate 8.92 times less return on investment than AP Moeller. But when comparing it to its historical volatility, Eastman Chemical Co is 1.2 times less risky than AP Moeller. It trades about 0.01 of its potential returns per unit of risk. AP Moeller Maersk AS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,037,109  in AP Moeller Maersk AS on December 24, 2024 and sell it today you would earn a total of  122,891  from holding AP Moeller Maersk AS or generate 11.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.94%
Values	Daily Returns

Eastman Chemical Co  vs.  AP Moeller Maersk AS

Eastman Chemical

Risk-Adjusted Performance

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 comparatively stable basic indicators, Eastman Chemical is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

AP Moeller Maersk

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller Maersk AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AP Moeller unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and AP Moeller

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

The idea behind Eastman Chemical Co and AP Moeller Maersk AS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.