Correlation Between Micron Technology and Eastman Chemical

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

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

Diversification Opportunities for Micron Technology and Eastman Chemical

0.38

Correlation Coefficient

Micron Technology  Eastman Chemical

Weak diversification

The 3 months correlation between Micron and Eastman is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Micron Technology 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 Micron Technology are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Micron Technology i.e., Micron Technology and Eastman Chemical go up and down completely randomly.

Pair Corralation between Micron Technology and Eastman Chemical

Assuming the 90 days trading horizon Micron Technology is expected to generate 2.95 times more return on investment than Eastman Chemical. However, Micron Technology is 2.95 times more volatile than Eastman Chemical Co. It trades about 0.01 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about -0.15 per unit of risk. If you would invest  10,668  in Micron Technology on October 27, 2024 and sell it today you would lose (336.00) from holding Micron Technology or give up 3.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

Micron Technology  vs.  Eastman Chemical Co

Micron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Micron Technology and Eastman Chemical

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

The idea behind Micron Technology and Eastman Chemical Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.