Correlation Between Eastman Chemical and NEL ASA

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

By analyzing existing cross correlation between Eastman Chemical and NEL ASA ADR30, you can compare the effects of market volatilities on Eastman Chemical and NEL ASA 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 NEL ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Chemical and NEL ASA.

Diversification Opportunities for Eastman Chemical and NEL ASA

-0.55

Correlation Coefficient

Eastman Chemical  NEL ASA

Excellent diversification

The 3 months correlation between Eastman and NEL is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and NEL ASA ADR30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEL ASA ADR30 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 are associated (or correlated) with NEL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEL ASA ADR30 has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and NEL ASA go up and down completely randomly.

Pair Corralation between Eastman Chemical and NEL ASA

Assuming the 90 days horizon Eastman Chemical is expected to generate 0.28 times more return on investment than NEL ASA. However, Eastman Chemical is 3.63 times less risky than NEL ASA. It trades about 0.14 of its potential returns per unit of risk. NEL ASA ADR30 is currently generating about -0.15 per unit of risk. If you would invest  8,827  in Eastman Chemical on September 5, 2024 and sell it today you would earn a total of  1,163  from holding Eastman Chemical or generate 13.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Eastman Chemical  vs.  NEL ASA ADR30

Eastman Chemical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eastman Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

NEL ASA ADR30

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEL ASA ADR30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eastman Chemical and NEL ASA

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

The idea behind Eastman Chemical and NEL ASA ADR30 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.