Correlation Between CVR Partners and Eastman Chemical

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

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

Diversification Opportunities for CVR Partners and Eastman Chemical

0.23

Correlation Coefficient

CVR Partners  Eastman Chemical

Modest diversification

The 3 months correlation between CVR and Eastman is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CVR Partners LP and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and CVR Partners 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 CVR Partners LP 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 CVR Partners i.e., CVR Partners and Eastman Chemical go up and down completely randomly.

Pair Corralation between CVR Partners and Eastman Chemical

Considering the 90-day investment horizon CVR Partners LP is expected to generate 0.84 times more return on investment than Eastman Chemical. However, CVR Partners LP is 1.19 times less risky than Eastman Chemical. It trades about 0.04 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.01 per unit of risk. If you would invest  7,356  in CVR Partners LP on December 27, 2024 and sell it today you would earn a total of  194.00  from holding CVR Partners LP or generate 2.64% return on investment over 90 days.

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

CVR Partners LP  vs.  Eastman Chemical

CVR Partners LP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CVR Partners is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Eastman Chemical

Risk-Adjusted Performance

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 very healthy primary indicators, Eastman Chemical is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CVR Partners and Eastman Chemical

The main advantage of trading using opposite CVR Partners and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Partners 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 CVR Partners LP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.