Correlation Between Eastman Chemical and Flutter Entertainment

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

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

Diversification Opportunities for Eastman Chemical and Flutter Entertainment

-0.29

Correlation Coefficient

Eastman Chemical  Flutter Entertainment

Very good diversification

The 3 months correlation between Eastman and Flutter is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Flutter Entertainment plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment plc 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment plc has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Eastman Chemical and Flutter Entertainment

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Flutter Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.64 times less risky than Flutter Entertainment. The stock trades about -0.11 of its potential returns per unit of risk. The Flutter Entertainment plc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  25,101  in Flutter Entertainment plc on September 12, 2024 and sell it today you would earn a total of  2,370  from holding Flutter Entertainment plc or generate 9.44% 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.  Flutter Entertainment plc

Eastman Chemical

Risk-Adjusted Performance

0 of 100

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 very healthy primary indicators, Eastman Chemical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Flutter Entertainment plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flutter Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and Flutter Entertainment

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

The idea behind Eastman Chemical and Flutter Entertainment plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.