Correlation Between Eastman Chemical and Thor Industries
Can any of the company-specific risk be diversified away by investing in both Eastman Chemical and Thor Industries 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 Thor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Chemical and Thor Industries, you can compare the effects of market volatilities on Eastman Chemical and Thor Industries 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 Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and Thor Industries.
Diversification Opportunities for Eastman Chemical and Thor Industries
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eastman and Thor is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Thor Industries go up and down completely randomly.
Pair Corralation between Eastman Chemical and Thor Industries
Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Thor Industries. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 1.46 times less risky than Thor Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Thor Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9,094 in Thor Industries on September 25, 2024 and sell it today you would earn a total of 474.50 from holding Thor Industries or generate 5.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Eastman Chemical vs. Thor Industries
Performance |
Timeline |
Eastman Chemical |
Thor Industries |
Eastman Chemical and Thor Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eastman Chemical and Thor Industries
The main advantage of trading using opposite Eastman Chemical and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Thor Industries 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 Thor Industries will offset losses from the drop in Thor Industries' long position.Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical vs. LyondellBasell Industries NV |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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