Correlation Between Eastman Chemical and Tesla

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

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

Diversification Opportunities for Eastman Chemical and Tesla

-0.82

Correlation Coefficient

Eastman Chemical  Tesla

Pay attention - limited upside

The 3 months correlation between Eastman and Tesla is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Tesla go up and down completely randomly.

Pair Corralation between Eastman Chemical and Tesla

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 2.99 times less risky than Tesla. The stock trades about -0.02 of its potential returns per unit of risk. The Tesla Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  19,742  in Tesla Inc on September 25, 2024 and sell it today you would earn a total of  25,752  from holding Tesla Inc or generate 130.44% return on investment over 90 days.

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

Eastman Chemical  vs.  Tesla Inc

Eastman Chemical

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Tesla Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and Tesla

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

The idea behind Eastman Chemical and Tesla Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.