Correlation Between Eastman Chemical and X FAB

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

Diversification Opportunities for Eastman Chemical and X FAB

0.34

Correlation Coefficient

Eastman Chemical  X FAB

Weak diversification

The 3 months correlation between Eastman and 0ROZ is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and X FAB go up and down completely randomly.

Pair Corralation between Eastman Chemical and X FAB

Assuming the 90 days trading horizon Eastman Chemical Co is expected to generate 0.47 times more return on investment than X FAB. However, Eastman Chemical Co is 2.14 times less risky than X FAB. It trades about 0.06 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.08 per unit of risk. If you would invest  9,986  in Eastman Chemical Co on September 3, 2024 and sell it today you would earn a total of  486.00  from holding Eastman Chemical Co or generate 4.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Eastman Chemical Co  vs.  X FAB Silicon Foundries

Eastman Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eastman Chemical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Eastman Chemical and X FAB

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

The idea behind Eastman Chemical Co and X FAB Silicon Foundries 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.