Correlation Between Energisa and Eastman Chemical

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

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

Diversification Opportunities for Energisa and Eastman Chemical

0.64

Correlation Coefficient

Energisa  Eastman Chemical

Poor diversification

The 3 months correlation between Energisa and Eastman is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Energisa 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 Energisa SA are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Energisa i.e., Energisa and Eastman Chemical go up and down completely randomly.

Pair Corralation between Energisa and Eastman Chemical

Assuming the 90 days trading horizon Energisa SA is expected to generate 3.14 times more return on investment than Eastman Chemical. However, Energisa is 3.14 times more volatile than Eastman Chemical. It trades about 0.1 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.1 per unit of risk. If you would invest  3,684  in Energisa SA on December 27, 2024 and sell it today you would earn a total of  407.00  from holding Energisa SA or generate 11.05% return on investment over 90 days.

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

Energisa SA  vs.  Eastman Chemical

Energisa SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Energisa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Eastman Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Eastman Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energisa and Eastman Chemical

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

The idea behind Energisa SA and Eastman Chemical 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.