Correlation Between Eastman Chemical and BW OFFSHORE

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

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

Diversification Opportunities for Eastman Chemical and BW OFFSHORE

0.51

Correlation Coefficient

Eastman Chemical  BW OFFSHORE

Very weak diversification

The 3 months correlation between Eastman and XY81 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD 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 BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and BW OFFSHORE go up and down completely randomly.

Pair Corralation between Eastman Chemical and BW OFFSHORE

Assuming the 90 days horizon Eastman Chemical is expected to generate 1.69 times less return on investment than BW OFFSHORE. But when comparing it to its historical volatility, Eastman Chemical is 1.99 times less risky than BW OFFSHORE. It trades about 0.07 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  213.00  in BW OFFSHORE LTD on September 13, 2024 and sell it today you would earn a total of  20.00  from holding BW OFFSHORE LTD or generate 9.39% return on investment over 90 days.

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

Eastman Chemical  vs.  BW OFFSHORE LTD

Eastman Chemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eastman Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BW OFFSHORE LTD

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eastman Chemical and BW OFFSHORE

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

The idea behind Eastman Chemical and BW OFFSHORE LTD 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.