Correlation Between Eastman Chemical and COACH

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

By analyzing existing cross correlation between Eastman Chemical and COACH INC 425, you can compare the effects of market volatilities on Eastman Chemical and COACH 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 COACH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and COACH.

Diversification Opportunities for Eastman Chemical and COACH

0.33

Correlation Coefficient

Eastman Chemical  COACH

Weak diversification

The 3 months correlation between Eastman and COACH is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and COACH INC 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COACH INC 425 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 COACH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COACH INC 425 has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and COACH go up and down completely randomly.

Pair Corralation between Eastman Chemical and COACH

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the COACH. In addition to that, Eastman Chemical is 3.2 times more volatile than COACH INC 425. It trades about -0.25 of its total potential returns per unit of risk. COACH INC 425 is currently generating about -0.2 per unit of volatility. If you would invest  9,975  in COACH INC 425 on September 17, 2024 and sell it today you would lose (132.00) from holding COACH INC 425 or give up 1.32% of portfolio value over 90 days.

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

Eastman Chemical  vs.  COACH INC 425

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 latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

COACH INC 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COACH INC 425 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COACH is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastman Chemical and COACH

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

The idea behind Eastman Chemical and COACH INC 425 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.