Correlation Between Eastman Chemical and SCANSOURCE

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

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

Diversification Opportunities for Eastman Chemical and SCANSOURCE

-0.22

Correlation Coefficient

Eastman Chemical  SCANSOURCE

Very good diversification

The 3 months correlation between Eastman and SCANSOURCE is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and SCANSOURCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANSOURCE 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 SCANSOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCANSOURCE has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and SCANSOURCE go up and down completely randomly.

Pair Corralation between Eastman Chemical and SCANSOURCE

Assuming the 90 days horizon Eastman Chemical is expected to under-perform the SCANSOURCE. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.75 times less risky than SCANSOURCE. The stock trades about -0.12 of its potential returns per unit of risk. The SCANSOURCE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,300  in SCANSOURCE on September 26, 2024 and sell it today you would earn a total of  280.00  from holding SCANSOURCE or generate 6.51% 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.  SCANSOURCE

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SCANSOURCE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCANSOURCE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SCANSOURCE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eastman Chemical and SCANSOURCE

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

The idea behind Eastman Chemical and SCANSOURCE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.