Correlation Between Eastman Chemical and Incitec Pivot

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Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Incitec Pivot 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 Incitec Pivot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Incitec Pivot Ltd, you can compare the effects of market volatilities on Eastman Chemical and Incitec Pivot 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 Incitec Pivot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Incitec Pivot.

Diversification Opportunities for Eastman Chemical and Incitec Pivot

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Eastman and Incitec is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot 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 Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Incitec Pivot go up and down completely randomly.

Pair Corralation between Eastman Chemical and Incitec Pivot

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Incitec Pivot. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.91 times less risky than Incitec Pivot. The stock trades about -0.41 of its potential returns per unit of risk. The Incitec Pivot Ltd is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Incitec Pivot Ltd on October 8, 2024 and sell it today you would earn a total of  26.00  from holding Incitec Pivot Ltd or generate 13.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Eastman Chemical  vs.  Incitec Pivot Ltd

 Performance 
       Timeline  
Eastman Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
Incitec Pivot 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Incitec Pivot showed solid returns over the last few months and may actually be approaching a breakup point.

Eastman Chemical and Incitec Pivot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eastman Chemical and Incitec Pivot

The main advantage of trading using opposite Eastman Chemical and Incitec Pivot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Incitec Pivot 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 Incitec Pivot will offset losses from the drop in Incitec Pivot's long position.
The idea behind Eastman Chemical and Incitec Pivot 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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