Correlation Between Avient Corp and Eastman Chemical

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

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

Diversification Opportunities for Avient Corp and Eastman Chemical

0.4

Correlation Coefficient

Avient Corp  Eastman Chemical

Very weak diversification

The 3 months correlation between Avient and Eastman is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Avient Corp and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Avient Corp 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 Avient Corp 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 Avient Corp i.e., Avient Corp and Eastman Chemical go up and down completely randomly.

Pair Corralation between Avient Corp and Eastman Chemical

Given the investment horizon of 90 days Avient Corp is expected to generate 1.22 times more return on investment than Eastman Chemical. However, Avient Corp is 1.22 times more volatile than Eastman Chemical. It trades about 0.09 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.06 per unit of risk. If you would invest  4,705  in Avient Corp on August 31, 2024 and sell it today you would earn a total of  423.00  from holding Avient Corp or generate 8.99% return on investment over 90 days.

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

Avient Corp  vs.  Eastman Chemical

Avient Corp

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avient Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Avient Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Eastman Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 4 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Avient Corp and Eastman Chemical

The main advantage of trading using opposite Avient Corp and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avient Corp 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 Avient Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..