Correlation Between Osaka Steel and Eastman Chemical

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

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

Diversification Opportunities for Osaka Steel and Eastman Chemical

-0.38

Correlation Coefficient

Osaka Steel  Eastman Chemical

Very good diversification

The 3 months correlation between Osaka and Eastman is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Osaka Steel Co, and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Osaka Steel 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 Osaka Steel Co, 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 Osaka Steel i.e., Osaka Steel and Eastman Chemical go up and down completely randomly.

Pair Corralation between Osaka Steel and Eastman Chemical

Assuming the 90 days horizon Osaka Steel is expected to generate 2.7 times less return on investment than Eastman Chemical. But when comparing it to its historical volatility, Osaka Steel Co, is 18.72 times less risky than Eastman Chemical. It trades about 0.08 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,551  in Eastman Chemical on September 18, 2024 and sell it today you would earn a total of  95.00  from holding Eastman Chemical or generate 0.99% return on investment over 90 days.

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

Osaka Steel Co,  vs.  Eastman Chemical

Osaka Steel Co,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Osaka Steel Co, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Osaka Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Osaka Steel and Eastman Chemical

The main advantage of trading using opposite Osaka Steel and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Osaka Steel 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 Osaka Steel Co, 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.