Correlation Between Cars and Eastman Chemical

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

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

Diversification Opportunities for Cars and Eastman Chemical

-0.48

Correlation Coefficient

Cars  Eastman Chemical

Very good diversification

The 3 months correlation between Cars and Eastman is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Cars 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 Cars Inc 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 Cars i.e., Cars and Eastman Chemical go up and down completely randomly.

Pair Corralation between Cars and Eastman Chemical

Given the investment horizon of 90 days Cars Inc is expected to under-perform the Eastman Chemical. In addition to that, Cars is 1.51 times more volatile than Eastman Chemical. It trades about -0.03 of its total potential returns per unit of risk. Eastman Chemical is currently generating about -0.02 per unit of volatility. If you would invest  9,560  in Eastman Chemical on September 25, 2024 and sell it today you would lose (433.00) from holding Eastman Chemical or give up 4.53% of portfolio value over 90 days.

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

Cars Inc  vs.  Eastman Chemical

Cars Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cars is not utilizing all of its potentials. The recent 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 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cars and Eastman Chemical

The main advantage of trading using opposite Cars and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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 Cars Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.