Correlation Between Eastman Chemical and TERADATA

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

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

Diversification Opportunities for Eastman Chemical and TERADATA

-0.03

Correlation Coefficient

Eastman Chemical  TERADATA

Good diversification

The 3 months correlation between Eastman and TERADATA is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and TERADATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADATA 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 TERADATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TERADATA has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and TERADATA go up and down completely randomly.

Pair Corralation between Eastman Chemical and TERADATA

Assuming the 90 days horizon Eastman Chemical is expected to under-perform the TERADATA. In addition to that, Eastman Chemical is 1.57 times more volatile than TERADATA. It trades about -0.2 of its total potential returns per unit of risk. TERADATA is currently generating about 0.62 per unit of volatility. If you would invest  2,760  in TERADATA on September 20, 2024 and sell it today you would earn a total of  340.00  from holding TERADATA or generate 12.32% return on investment over 90 days.

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

Eastman Chemical  vs.  TERADATA

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 nearly stable basic indicators, Eastman Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TERADATA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TERADATA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TERADATA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and TERADATA

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

The idea behind Eastman Chemical and TERADATA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.