Correlation Between SANTANDER and Eastman Chemical

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

By analyzing existing cross correlation between SANTANDER UK 10 and Eastman Chemical Co, you can compare the effects of market volatilities on SANTANDER 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 SANTANDER with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANTANDER and Eastman Chemical.

Diversification Opportunities for SANTANDER and Eastman Chemical

0.64

Correlation Coefficient

SANTANDER  Eastman Chemical

Poor diversification

The 3 months correlation between SANTANDER and Eastman is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 10 and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and SANTANDER 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 SANTANDER UK 10 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 SANTANDER i.e., SANTANDER and Eastman Chemical go up and down completely randomly.

Pair Corralation between SANTANDER and Eastman Chemical

Assuming the 90 days trading horizon SANTANDER UK 10 is expected to generate 0.58 times more return on investment than Eastman Chemical. However, SANTANDER UK 10 is 1.74 times less risky than Eastman Chemical. It trades about 0.05 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about 0.03 per unit of risk. If you would invest  12,133  in SANTANDER UK 10 on October 21, 2024 and sell it today you would earn a total of  3,307  from holding SANTANDER UK 10 or generate 27.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.57%
Values	Daily Returns

SANTANDER UK 10  vs.  Eastman Chemical Co

SANTANDER UK 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SANTANDER 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

0 of 100

Very Weak

Over the last 90 days Eastman Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SANTANDER and Eastman Chemical

The main advantage of trading using opposite SANTANDER and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SANTANDER 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 SANTANDER UK 10 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.