Correlation Between Blue Moon and Eastman Chemical

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

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

Diversification Opportunities for Blue Moon and Eastman Chemical

-0.5

Correlation Coefficient

Blue Moon  Eastman Chemical

Very good diversification

The 3 months correlation between Blue and Eastman is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Blue Moon Metals and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Blue Moon 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 Blue Moon Metals 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 Blue Moon i.e., Blue Moon and Eastman Chemical go up and down completely randomly.

Pair Corralation between Blue Moon and Eastman Chemical

Assuming the 90 days horizon Blue Moon Metals is expected to generate 3.06 times more return on investment than Eastman Chemical. However, Blue Moon is 3.06 times more volatile than Eastman Chemical. It trades about 0.11 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.2 per unit of risk. If you would invest  20.00  in Blue Moon Metals on September 25, 2024 and sell it today you would earn a total of  5.00  from holding Blue Moon Metals or generate 25.0% return on investment over 90 days.

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

Blue Moon Metals  vs.  Eastman Chemical

Blue Moon Metals

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Moon Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Blue Moon reported solid returns over the last few months and may actually be approaching a breakup point.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Blue Moon and Eastman Chemical

The main advantage of trading using opposite Blue Moon and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Moon 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 Blue Moon Metals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.