Correlation Between Learning Technologies and Eastman Chemical

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

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

Diversification Opportunities for Learning Technologies and Eastman Chemical

0.28

Correlation Coefficient

Learning Technologies  Eastman Chemical

Modest diversification

The 3 months correlation between Learning and Eastman is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Learning Technologies Group and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Learning Technologies 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 Learning Technologies 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 Learning Technologies i.e., Learning Technologies and Eastman Chemical go up and down completely randomly.

Pair Corralation between Learning Technologies and Eastman Chemical

Assuming the 90 days trading horizon Learning Technologies Group is expected to generate 0.83 times more return on investment than Eastman Chemical. However, Learning Technologies Group is 1.21 times less risky than Eastman Chemical. It trades about 0.03 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about 0.02 per unit of risk. If you would invest  9,790  in Learning Technologies Group on December 23, 2024 and sell it today you would earn a total of  170.00  from holding Learning Technologies Group or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Learning Technologies Group  vs.  Eastman Chemical Co

Learning Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Learning Technologies Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Learning Technologies is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Eastman Chemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eastman Chemical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Learning Technologies and Eastman Chemical

The main advantage of trading using opposite Learning Technologies and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Learning Technologies 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 Learning Technologies Group and Eastman Chemical Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.