Correlation Between Eastman Chemical and Loop Industries

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

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

Diversification Opportunities for Eastman Chemical and Loop Industries

0.88

Correlation Coefficient

Eastman Chemical  Loop Industries

Very poor diversification

The 3 months correlation between Eastman and Loop is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Loop Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Industries 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 Loop Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Industries has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Loop Industries go up and down completely randomly.

Pair Corralation between Eastman Chemical and Loop Industries

Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.29 times more return on investment than Loop Industries. However, Eastman Chemical is 3.47 times less risky than Loop Industries. It trades about 0.0 of its potential returns per unit of risk. Loop Industries is currently generating about -0.02 per unit of risk. If you would invest  10,049  in Eastman Chemical on September 13, 2024 and sell it today you would lose (18.00) from holding Eastman Chemical or give up 0.18% of portfolio value over 90 days.

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

Eastman Chemical  vs.  Loop Industries

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 very healthy primary indicators, Eastman Chemical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Loop Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loop Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Loop Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eastman Chemical and Loop Industries

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

The idea behind Eastman Chemical and Loop Industries 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.