Correlation Between Eastman Chemical and Skechers USA

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

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

Diversification Opportunities for Eastman Chemical and Skechers USA

0.13

Correlation Coefficient

Eastman Chemical  Skechers USA

Average diversification

The 3 months correlation between Eastman and Skechers is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA 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 Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Skechers USA go up and down completely randomly.

Pair Corralation between Eastman Chemical and Skechers USA

Considering the 90-day investment horizon Eastman Chemical is expected to generate 0.61 times more return on investment than Skechers USA. However, Eastman Chemical is 1.63 times less risky than Skechers USA. It trades about 0.06 of its potential returns per unit of risk. Skechers USA is currently generating about 0.0 per unit of risk. If you would invest  9,950  in Eastman Chemical on September 3, 2024 and sell it today you would earn a total of  477.00  from holding Eastman Chemical or generate 4.79% return on investment over 90 days.

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

Eastman Chemical  vs.  Skechers USA

Eastman Chemical

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Eastman Chemical is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Skechers USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skechers USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastman Chemical and Skechers USA

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

The idea behind Eastman Chemical and Skechers USA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..