Correlation Between Eastman Chemical and Afya

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

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

Diversification Opportunities for Eastman Chemical and Afya

0.5

Correlation Coefficient

Eastman Chemical  Afya

Very weak diversification

The 3 months correlation between Eastman and Afya is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya 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 Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Afya go up and down completely randomly.

Pair Corralation between Eastman Chemical and Afya

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Afya. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.67 times less risky than Afya. The stock trades about -0.48 of its potential returns per unit of risk. The Afya is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,623  in Afya on September 30, 2024 and sell it today you would lose (38.00) from holding Afya or give up 2.34% of portfolio value over 90 days.

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

Eastman Chemical  vs.  Afya

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. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastman Chemical and Afya

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

The idea behind Eastman Chemical and Afya 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.