Correlation Between Eastman Chemical and Infosys

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

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

Diversification Opportunities for Eastman Chemical and Infosys

0.12

Correlation Coefficient

Eastman Chemical  Infosys

Average diversification

The 3 months correlation between Eastman and Infosys is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Infosys go up and down completely randomly.

Pair Corralation between Eastman Chemical and Infosys

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Infosys. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.03 times less risky than Infosys. The stock trades about -0.06 of its potential returns per unit of risk. The Infosys Ltd ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,293  in Infosys Ltd ADR on September 14, 2024 and sell it today you would earn a total of  32.00  from holding Infosys Ltd ADR or generate 1.4% return on investment over 90 days.

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

Eastman Chemical  vs.  Infosys Ltd ADR

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

Infosys Ltd ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Ltd ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastman Chemical and Infosys

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

The idea behind Eastman Chemical and Infosys Ltd ADR 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.