Correlation Between Jernimo Martins and Eastman Chemical

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

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

Diversification Opportunities for Jernimo Martins and Eastman Chemical

-0.42

Correlation Coefficient

Jernimo Martins  Eastman Chemical

Very good diversification

The 3 months correlation between Jernimo and Eastman is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Jernimo Martins SGPS and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Jernimo Martins 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 Jernimo Martins SGPS 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 Jernimo Martins i.e., Jernimo Martins and Eastman Chemical go up and down completely randomly.

Pair Corralation between Jernimo Martins and Eastman Chemical

Assuming the 90 days horizon Jernimo Martins SGPS is expected to generate 1.41 times more return on investment than Eastman Chemical. However, Jernimo Martins is 1.41 times more volatile than Eastman Chemical. It trades about -0.01 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.02 per unit of risk. If you would invest  1,936  in Jernimo Martins SGPS on September 23, 2024 and sell it today you would lose (131.00) from holding Jernimo Martins SGPS or give up 6.77% of portfolio value over 90 days.

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

Jernimo Martins SGPS  vs.  Eastman Chemical

Jernimo Martins SGPS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jernimo Martins SGPS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jernimo Martins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Jernimo Martins and Eastman Chemical

The main advantage of trading using opposite Jernimo Martins and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jernimo Martins 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 Jernimo Martins SGPS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.