Correlation Between Eastman Chemical and Dno ASA

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

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

Diversification Opportunities for Eastman Chemical and Dno ASA

-0.13

Correlation Coefficient

Eastman Chemical  Dno ASA

Good diversification

The 3 months correlation between Eastman and Dno is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Dno ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dno ASA 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 Dno ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dno ASA has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Dno ASA go up and down completely randomly.

Pair Corralation between Eastman Chemical and Dno ASA

Assuming the 90 days horizon Eastman Chemical is expected to under-perform the Dno ASA. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.38 times less risky than Dno ASA. The stock trades about -0.03 of its potential returns per unit of risk. The Dno ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,359  in Dno ASA on September 15, 2024 and sell it today you would earn a total of  6.00  from holding Dno ASA or generate 0.44% 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.  Dno ASA

Eastman Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Eastman Chemical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dno ASA

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dno ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dno ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eastman Chemical and Dno ASA

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

The idea behind Eastman Chemical and Dno ASA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.