Correlation Between Sealed Air and Eastman Chemical

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

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

Diversification Opportunities for Sealed Air and Eastman Chemical

-0.19

Correlation Coefficient

Sealed Air  Eastman Chemical

Good diversification

The 3 months correlation between Sealed and Eastman is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and Eastman Chemical go up and down completely randomly.

Pair Corralation between Sealed Air and Eastman Chemical

Considering the 90-day investment horizon Sealed Air is expected to generate 1.14 times more return on investment than Eastman Chemical. However, Sealed Air is 1.14 times more volatile than Eastman Chemical. It trades about 0.12 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.33 per unit of risk. If you would invest  3,477  in Sealed Air on September 18, 2024 and sell it today you would earn a total of  106.00  from holding Sealed Air or generate 3.05% return on investment over 90 days.

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

Sealed Air  vs.  Eastman Chemical

Sealed Air

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest 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 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 Sealed Air and Eastman Chemical

The main advantage of trading using opposite Sealed Air and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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 Sealed Air 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.