Correlation Between CLOVER HEALTH and Eastman Chemical

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

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

Diversification Opportunities for CLOVER HEALTH and Eastman Chemical

0.39

Correlation Coefficient

CLOVER HEALTH  Eastman Chemical

Weak diversification

The 3 months correlation between CLOVER and Eastman is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CLOVER HEALTH INV and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and CLOVER HEALTH 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 CLOVER HEALTH INV 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 CLOVER HEALTH i.e., CLOVER HEALTH and Eastman Chemical go up and down completely randomly.

Pair Corralation between CLOVER HEALTH and Eastman Chemical

Assuming the 90 days horizon CLOVER HEALTH INV is expected to generate 3.53 times more return on investment than Eastman Chemical. However, CLOVER HEALTH is 3.53 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 0.02 per unit of risk. If you would invest  107.00  in CLOVER HEALTH INV on October 11, 2024 and sell it today you would earn a total of  212.00  from holding CLOVER HEALTH INV or generate 198.13% return on investment over 90 days.

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

CLOVER HEALTH INV  vs.  Eastman Chemical

CLOVER HEALTH INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLOVER HEALTH INV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CLOVER HEALTH and Eastman Chemical

The main advantage of trading using opposite CLOVER HEALTH and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CLOVER HEALTH 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 CLOVER HEALTH INV 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.