Correlation Between Eastman Chemical and Thai Beverage

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

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

Diversification Opportunities for Eastman Chemical and Thai Beverage

0.15

Correlation Coefficient

Eastman Chemical  Thai Beverage

Average diversification

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

Pair Corralation between Eastman Chemical and Thai Beverage

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Thai Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.48 times less risky than Thai Beverage. The stock trades about 0.0 of its potential returns per unit of risk. The Thai Beverage PCL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,231  in Thai Beverage PCL on December 28, 2024 and sell it today you would earn a total of  835.00  from holding Thai Beverage PCL or generate 25.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Eastman Chemical  vs.  Thai Beverage PCL

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.

Thai Beverage PCL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage PCL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Thai Beverage showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and Thai Beverage

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

The idea behind Eastman Chemical and Thai Beverage PCL 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.