Correlation Between Superior Plus and Eastman Chemical

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

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

Diversification Opportunities for Superior Plus and Eastman Chemical

0.12

Correlation Coefficient

Superior Plus  Eastman Chemical

Average diversification

The 3 months correlation between Superior and Eastman is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Eastman Chemical go up and down completely randomly.

Pair Corralation between Superior Plus and Eastman Chemical

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Eastman Chemical. In addition to that, Superior Plus is 2.46 times more volatile than Eastman Chemical. It trades about -0.03 of its total potential returns per unit of risk. Eastman Chemical is currently generating about 0.04 per unit of volatility. If you would invest  9,218  in Eastman Chemical on September 14, 2024 and sell it today you would earn a total of  232.00  from holding Eastman Chemical or generate 2.52% return on investment over 90 days.

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

Superior Plus Corp  vs.  Eastman Chemical

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Eastman Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Eastman Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Superior Plus and Eastman Chemical

The main advantage of trading using opposite Superior Plus and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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 Superior Plus Corp 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.