Correlation Between Eastman Chemical and Verra Mobility

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

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

Diversification Opportunities for Eastman Chemical and Verra Mobility

0.82

Correlation Coefficient

Eastman Chemical  Verra Mobility

Very poor diversification

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

Pair Corralation between Eastman Chemical and Verra Mobility

Considering the 90-day investment horizon Eastman Chemical is expected to generate 2.4 times less return on investment than Verra Mobility. But when comparing it to its historical volatility, Eastman Chemical is 1.03 times less risky than Verra Mobility. It trades about 0.03 of its potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,430  in Verra Mobility Corp on September 21, 2024 and sell it today you would earn a total of  934.00  from holding Verra Mobility Corp or generate 65.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Eastman Chemical  vs.  Verra Mobility Corp

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 unsteady 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.

Verra Mobility Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verra Mobility Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic 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.

Pair Trading with Eastman Chemical and Verra Mobility

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

The idea behind Eastman Chemical and Verra Mobility Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..