Correlation Between Eastman Chemical and Patterson UTI
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Patterson UTI 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 Patterson UTI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Patterson UTI Energy, you can compare the effects of market volatilities on Eastman Chemical and Patterson UTI 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 Patterson UTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Patterson UTI.
Diversification Opportunities for Eastman Chemical and Patterson UTI
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Eastman and Patterson is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Patterson UTI Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson UTI Energy 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 Patterson UTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson UTI Energy has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Patterson UTI go up and down completely randomly.
Pair Corralation between Eastman Chemical and Patterson UTI
Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Patterson UTI. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.53 times less risky than Patterson UTI. The stock trades about -0.46 of its potential returns per unit of risk. The Patterson UTI Energy is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 762.00 in Patterson UTI Energy on October 13, 2024 and sell it today you would earn a total of 88.00 from holding Patterson UTI Energy or generate 11.55% 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. Patterson UTI Energy
Performance |
Timeline |
Eastman Chemical |
Patterson UTI Energy |
Eastman Chemical and Patterson UTI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eastman Chemical and Patterson UTI
The main advantage of trading using opposite Eastman Chemical and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Patterson UTI 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 Patterson UTI will offset losses from the drop in Patterson UTI's long position.Eastman Chemical vs. Air Products and | Eastman Chemical vs. International Flavors Fragrances | Eastman Chemical vs. Sherwin Williams Co | Eastman Chemical vs. PPG Industries |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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