Correlation Between Eastman Chemical and Kronos Worldwide

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

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

Diversification Opportunities for Eastman Chemical and Kronos Worldwide

0.9

Correlation Coefficient

Eastman Chemical  Kronos Worldwide

Almost no diversification

The 3 months correlation between Eastman and Kronos is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Kronos Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Worldwide 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 Kronos Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Worldwide has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Kronos Worldwide go up and down completely randomly.

Pair Corralation between Eastman Chemical and Kronos Worldwide

Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.78 times more return on investment than Kronos Worldwide. However, Eastman Chemical is 1.28 times less risky than Kronos Worldwide. It trades about 0.1 of its potential returns per unit of risk. Kronos Worldwide is currently generating about -0.07 per unit of risk. If you would invest  9,121  in Eastman Chemical on October 23, 2024 and sell it today you would earn a total of  200.00  from holding Eastman Chemical or generate 2.19% return on investment over 90 days.

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

Eastman Chemical  vs.  Kronos Worldwide

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 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.

Kronos Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kronos Worldwide 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 basic 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.

Pair Trading with Eastman Chemical and Kronos Worldwide

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

The idea behind Eastman Chemical and Kronos Worldwide 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..