Correlation Between Air Liquide and Eastman Chemical

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

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

Diversification Opportunities for Air Liquide and Eastman Chemical

0.59

Correlation Coefficient

Air Liquide  Eastman Chemical

Very weak diversification

The 3 months correlation between Air and Eastman is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Air Liquide 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 Air Liquide SA 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 Air Liquide i.e., Air Liquide and Eastman Chemical go up and down completely randomly.

Pair Corralation between Air Liquide and Eastman Chemical

Assuming the 90 days horizon Air Liquide SA is expected to under-perform the Eastman Chemical. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air Liquide SA is 1.22 times less risky than Eastman Chemical. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Eastman Chemical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,815  in Eastman Chemical on September 11, 2024 and sell it today you would earn a total of  117.00  from holding Eastman Chemical or generate 1.19% return on investment over 90 days.

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

Air Liquide SA  vs.  Eastman Chemical

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Eastman Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Eastman Chemical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Air Liquide and Eastman Chemical

The main advantage of trading using opposite Air Liquide and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide 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 Air Liquide SA 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.