Correlation Between KIMBALL ELECTRONICS and Eastman Chemical

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and Eastman Chemical

0.17

Correlation Coefficient

KIMBALL ELECTRONICS  Eastman Chemical

Average diversification

The 3 months correlation between KIMBALL and Eastman is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and Eastman Chemical go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and Eastman Chemical

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 2.01 times more return on investment than Eastman Chemical. However, KIMBALL ELECTRONICS is 2.01 times more volatile than Eastman Chemical. It trades about 0.07 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.1 per unit of risk. If you would invest  1,650  in KIMBALL ELECTRONICS on August 31, 2024 and sell it today you would earn a total of  170.00  from holding KIMBALL ELECTRONICS or generate 10.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KIMBALL ELECTRONICS  vs.  Eastman Chemical

KIMBALL ELECTRONICS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KIMBALL ELECTRONICS may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Eastman Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eastman Chemical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with KIMBALL ELECTRONICS and Eastman Chemical

The main advantage of trading using opposite KIMBALL ELECTRONICS and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS and Eastman Chemical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.