Correlation Between Jefferies Financial and Eastman Chemical

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

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

Diversification Opportunities for Jefferies Financial and Eastman Chemical

0.56

Correlation Coefficient

Jefferies Financial  Eastman Chemical

Very weak diversification

The 3 months correlation between Jefferies and Eastman is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Jefferies Financial Group and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Jefferies Financial 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 Jefferies Financial Group 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 Jefferies Financial i.e., Jefferies Financial and Eastman Chemical go up and down completely randomly.

Pair Corralation between Jefferies Financial and Eastman Chemical

Assuming the 90 days trading horizon Jefferies Financial Group is expected to generate 29.7 times more return on investment than Eastman Chemical. However, Jefferies Financial is 29.7 times more volatile than Eastman Chemical. It trades about 0.26 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.16 per unit of risk. If you would invest  36,686  in Jefferies Financial Group on October 7, 2024 and sell it today you would earn a total of  12,020  from holding Jefferies Financial Group or generate 32.76% return on investment over 90 days.

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

Jefferies Financial Group  vs.  Eastman Chemical

Jefferies Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastman Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 10 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jefferies Financial and Eastman Chemical

The main advantage of trading using opposite Jefferies Financial and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jefferies Financial 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 Jefferies Financial Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .