Correlation Between Eastman Chemical and Plexus Corp

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

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

Diversification Opportunities for Eastman Chemical and Plexus Corp

-0.38

Correlation Coefficient

Eastman Chemical  Plexus Corp

Very good diversification

The 3 months correlation between Eastman and Plexus is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Plexus Corp go up and down completely randomly.

Pair Corralation between Eastman Chemical and Plexus Corp

Considering the 90-day investment horizon Eastman Chemical is expected to generate 27.48 times less return on investment than Plexus Corp. But when comparing it to its historical volatility, Eastman Chemical is 1.41 times less risky than Plexus Corp. It trades about 0.01 of its potential returns per unit of risk. Plexus Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  12,423  in Plexus Corp on September 12, 2024 and sell it today you would earn a total of  4,234  from holding Plexus Corp or generate 34.08% return on investment over 90 days.

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

Eastman Chemical  vs.  Plexus Corp

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 current stock price disarray, may contribute to short-term losses for the investors.

Plexus Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and Plexus Corp

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

The idea behind Eastman Chemical and Plexus Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..