Correlation Between Lucid and Eastman Chemical

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

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

Diversification Opportunities for Lucid and Eastman Chemical

0.53

Correlation Coefficient

Lucid  Eastman Chemical

Very weak diversification

The 3 months correlation between Lucid and Eastman is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Lucid 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 Lucid 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 Lucid i.e., Lucid and Eastman Chemical go up and down completely randomly.

Pair Corralation between Lucid and Eastman Chemical

Given the investment horizon of 90 days Lucid Group is expected to generate 3.62 times more return on investment than Eastman Chemical. However, Lucid is 3.62 times more volatile than Eastman Chemical. It trades about 0.05 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.02 per unit of risk. If you would invest  267.00  in Lucid Group on September 25, 2024 and sell it today you would earn a total of  49.00  from holding Lucid Group or generate 18.35% return on investment over 90 days.

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

Lucid Group  vs.  Eastman Chemical

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Lucid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lucid and Eastman Chemical

The main advantage of trading using opposite Lucid and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.