Correlation Between Eastman Chemical and SBM Offshore

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

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

Diversification Opportunities for Eastman Chemical and SBM Offshore

-0.08

Correlation Coefficient

Eastman Chemical  SBM Offshore

Good diversification

The 3 months correlation between Eastman and SBM is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical Co and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and Eastman Chemical 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 Eastman Chemical Co are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and SBM Offshore go up and down completely randomly.

Pair Corralation between Eastman Chemical and SBM Offshore

Assuming the 90 days trading horizon Eastman Chemical Co is expected to under-perform the SBM Offshore. In addition to that, Eastman Chemical is 1.43 times more volatile than SBM Offshore NV. It trades about -0.55 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about -0.19 per unit of volatility. If you would invest  1,731  in SBM Offshore NV on September 27, 2024 and sell it today you would lose (57.00) from holding SBM Offshore NV or give up 3.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Eastman Chemical Co  vs.  SBM Offshore NV

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 conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SBM Offshore NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, SBM Offshore is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Eastman Chemical and SBM Offshore

The main advantage of trading using opposite Eastman Chemical and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, SBM Offshore 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 SBM Offshore will offset losses from the drop in SBM Offshore's long position.

The idea behind Eastman Chemical Co and SBM Offshore NV 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.