Correlation Between Eastman Chemical and EMBARK EDUCATION

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

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

Diversification Opportunities for Eastman Chemical and EMBARK EDUCATION

-0.08

Correlation Coefficient

Eastman Chemical  EMBARK EDUCATION

Good diversification

The 3 months correlation between Eastman and EMBARK is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and EMBARK EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARK EDUCATION LTD 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 EMBARK EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARK EDUCATION LTD has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and EMBARK EDUCATION go up and down completely randomly.

Pair Corralation between Eastman Chemical and EMBARK EDUCATION

Assuming the 90 days horizon Eastman Chemical is expected to under-perform the EMBARK EDUCATION. In addition to that, Eastman Chemical is 2.77 times more volatile than EMBARK EDUCATION LTD. It trades about -0.04 of its total potential returns per unit of risk. EMBARK EDUCATION LTD is currently generating about 0.0 per unit of volatility. If you would invest  31.00  in EMBARK EDUCATION LTD on December 29, 2024 and sell it today you would earn a total of  0.00  from holding EMBARK EDUCATION LTD or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Eastman Chemical  vs.  EMBARK EDUCATION LTD

Eastman Chemical

Risk-Adjusted Performance

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

EMBARK EDUCATION LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days EMBARK EDUCATION LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eastman Chemical and EMBARK EDUCATION

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

The idea behind Eastman Chemical and EMBARK EDUCATION LTD 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.