Correlation Between Eastman Chemical and Livent Corp

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

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

Diversification Opportunities for Eastman Chemical and Livent Corp

0.15

Correlation Coefficient

Eastman Chemical  Livent Corp

Average diversification

The 3 months correlation between Eastman and Livent is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Livent Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livent Corp 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 Livent Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livent Corp has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Livent Corp go up and down completely randomly.

Pair Corralation between Eastman Chemical and Livent Corp

If you would invest  9,724  in Eastman Chemical on September 5, 2024 and sell it today you would earn a total of  570.00  from holding Eastman Chemical or generate 5.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Eastman Chemical  vs.  Livent Corp

Eastman Chemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Eastman Chemical is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Livent Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livent Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Livent Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eastman Chemical and Livent Corp

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

The idea behind Eastman Chemical and Livent Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.