Correlation Between Eastman Kodak and Transportadora

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

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

Diversification Opportunities for Eastman Kodak and Transportadora

0.77

Correlation Coefficient

Eastman Kodak  Transportadora

Poor diversification

The 3 months correlation between Eastman and Transportadora is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Kodak Co and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas and Eastman Kodak 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 Kodak Co are associated (or correlated) with Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Eastman Kodak i.e., Eastman Kodak and Transportadora go up and down completely randomly.

Pair Corralation between Eastman Kodak and Transportadora

Given the investment horizon of 90 days Eastman Kodak Co is expected to under-perform the Transportadora. In addition to that, Eastman Kodak is 1.27 times more volatile than Transportadora de Gas. It trades about -0.1 of its total potential returns per unit of risk. Transportadora de Gas is currently generating about 0.15 per unit of volatility. If you would invest  3,012  in Transportadora de Gas on October 12, 2024 and sell it today you would earn a total of  265.00  from holding Transportadora de Gas or generate 8.8% return on investment over 90 days.

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

Eastman Kodak Co  vs.  Transportadora de Gas

Eastman Kodak

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Kodak Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Eastman Kodak disclosed solid returns over the last few months and may actually be approaching a breakup point.

Transportadora de Gas

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Kodak and Transportadora

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

The idea behind Eastman Kodak Co and Transportadora de Gas 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.