Correlation Between Eastman Chemical and Raytheon Technologies

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

Diversification Opportunities for Eastman Chemical and Raytheon Technologies

0.84

Correlation Coefficient

Eastman Chemical  Raytheon Technologies

Very poor diversification

The 3 months correlation between Eastman and Raytheon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Eastman Chemical and Raytheon Technologies

Assuming the 90 days trading horizon Eastman Chemical Co is expected to under-perform the Raytheon Technologies. In addition to that, Eastman Chemical is 1.18 times more volatile than Raytheon Technologies Corp. It trades about -0.2 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about -0.02 per unit of volatility. If you would invest  11,766  in Raytheon Technologies Corp on October 6, 2024 and sell it today you would lose (126.00) from holding Raytheon Technologies Corp or give up 1.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.12%
Values	Daily Returns

Eastman Chemical Co  vs.  Raytheon Technologies Corp

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.

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytheon Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eastman Chemical and Raytheon Technologies

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

The idea behind Eastman Chemical Co and Raytheon Technologies Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.