Correlation Between Eastman Chemical and Vestis

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

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

Diversification Opportunities for Eastman Chemical and Vestis

0.48

Correlation Coefficient

Eastman Chemical  Vestis

Very weak diversification

The 3 months correlation between Eastman and Vestis is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Vestis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestis 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 Vestis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestis has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Vestis go up and down completely randomly.

Pair Corralation between Eastman Chemical and Vestis

Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.39 times more return on investment than Vestis. However, Eastman Chemical is 2.55 times less risky than Vestis. It trades about 0.06 of its potential returns per unit of risk. Vestis is currently generating about 0.01 per unit of risk. If you would invest  7,594  in Eastman Chemical on August 31, 2024 and sell it today you would earn a total of  2,829  from holding Eastman Chemical or generate 37.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.38%
Values	Daily Returns

Eastman Chemical  vs.  Vestis

Eastman Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Vestis

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestis are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Vestis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and Vestis

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

The idea behind Eastman Chemical and Vestis 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.