Correlation Between Air Products and Eastman Chemical

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

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

Diversification Opportunities for Air Products and Eastman Chemical

-0.24

Correlation Coefficient

Air Products  Eastman Chemical

Very good diversification

The 3 months correlation between Air and Eastman is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Air Products 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 Air Products Chemicals 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 Air Products i.e., Air Products and Eastman Chemical go up and down completely randomly.

Pair Corralation between Air Products and Eastman Chemical

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 1.23 times more return on investment than Eastman Chemical. However, Air Products is 1.23 times more volatile than Eastman Chemical Co. It trades about 0.07 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about -0.1 per unit of risk. If you would invest  28,827  in Air Products Chemicals on September 18, 2024 and sell it today you would earn a total of  1,983  from holding Air Products Chemicals or generate 6.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Air Products Chemicals  vs.  Eastman Chemical Co

Air Products Chemicals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Air Products and Eastman Chemical

The main advantage of trading using opposite Air Products and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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 Air Products Chemicals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.