Correlation Between Eastman Chemical and REX American

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

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

Diversification Opportunities for Eastman Chemical and REX American

0.06

Correlation Coefficient

Eastman Chemical  REX American

Significant diversification

The 3 months correlation between Eastman and REX is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and REX American Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX American Resources 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 REX American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX American Resources has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and REX American go up and down completely randomly.

Pair Corralation between Eastman Chemical and REX American

Considering the 90-day investment horizon Eastman Chemical is expected to generate 1.02 times more return on investment than REX American. However, Eastman Chemical is 1.02 times more volatile than REX American Resources. It trades about -0.01 of its potential returns per unit of risk. REX American Resources is currently generating about -0.06 per unit of risk. If you would invest  9,090  in Eastman Chemical on December 27, 2024 and sell it today you would lose (156.00) from holding Eastman Chemical or give up 1.72% of portfolio value over 90 days.

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

Eastman Chemical  vs.  REX American Resources

Eastman Chemical

Risk-Adjusted Performance

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 latest stock price disarray, may contribute to short-term losses for the investors.

REX American Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days REX American Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Eastman Chemical and REX American

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

The idea behind Eastman Chemical and REX American Resources 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.