Correlation Between Eastman Chemical and Patria Investments

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

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

Diversification Opportunities for Eastman Chemical and Patria Investments

0.53

Correlation Coefficient

Eastman Chemical  Patria Investments

Very weak diversification

The 3 months correlation between Eastman and Patria is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments and Eastman Chemical 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 Eastman Chemical are associated (or correlated) with Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Patria Investments go up and down completely randomly.

Pair Corralation between Eastman Chemical and Patria Investments

Assuming the 90 days trading horizon Eastman Chemical is expected to generate 0.09 times more return on investment than Patria Investments. However, Eastman Chemical is 11.01 times less risky than Patria Investments. It trades about 0.23 of its potential returns per unit of risk. Patria Investments Limited is currently generating about -0.09 per unit of risk. If you would invest  27,365  in Eastman Chemical on October 10, 2024 and sell it today you would earn a total of  175.00  from holding Eastman Chemical or generate 0.64% return on investment over 90 days.

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

Eastman Chemical  vs.  Patria Investments Limited

Eastman Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Eastman Chemical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Patria Investments

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and Patria Investments

The main advantage of trading using opposite Eastman Chemical and Patria Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Patria Investments 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 Patria Investments will offset losses from the drop in Patria Investments' long position.

The idea behind Eastman Chemical and Patria Investments Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.