Correlation Between Bill and EASTMAN

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

By analyzing existing cross correlation between Bill Com Holdings and EASTMAN CHEM 48, you can compare the effects of market volatilities on Bill and EASTMAN 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 Bill with a short position of EASTMAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bill and EASTMAN.

Diversification Opportunities for Bill and EASTMAN

-0.32

Correlation Coefficient

Bill  EASTMAN

Very good diversification

The 3 months correlation between Bill and EASTMAN is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings and EASTMAN CHEM 48 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EASTMAN CHEM 48 and Bill 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 Bill Com Holdings are associated (or correlated) with EASTMAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EASTMAN CHEM 48 has no effect on the direction of Bill i.e., Bill and EASTMAN go up and down completely randomly.

Pair Corralation between Bill and EASTMAN

Given the investment horizon of 90 days Bill is expected to generate 289.45 times less return on investment than EASTMAN. But when comparing it to its historical volatility, Bill Com Holdings is 31.88 times less risky than EASTMAN. It trades about 0.01 of its potential returns per unit of risk. EASTMAN CHEM 48 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,438  in EASTMAN CHEM 48 on September 14, 2024 and sell it today you would lose (93.00) from holding EASTMAN CHEM 48 or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.69%
Values	Daily Returns

Bill Com Holdings  vs.  EASTMAN CHEM 48

Bill Com Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bill Com Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Bill disclosed solid returns over the last few months and may actually be approaching a breakup point.

EASTMAN CHEM 48

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EASTMAN CHEM 48 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for EASTMAN CHEM 48 investors.

Pair Trading with Bill and EASTMAN

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

The idea behind Bill Com Holdings and EASTMAN CHEM 48 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.