Correlation Between Reliance Industries and Eastman Chemical

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

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

Diversification Opportunities for Reliance Industries and Eastman Chemical

0.76

Correlation Coefficient

Reliance Industries  Eastman Chemical

Poor diversification

The 3 months correlation between Reliance and Eastman is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Reliance Industries 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 Reliance Industries Ltd are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Reliance Industries i.e., Reliance Industries and Eastman Chemical go up and down completely randomly.

Pair Corralation between Reliance Industries and Eastman Chemical

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to under-perform the Eastman Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Ltd is 1.03 times less risky than Eastman Chemical. The stock trades about -0.23 of its potential returns per unit of risk. The Eastman Chemical Co is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  10,724  in Eastman Chemical Co on September 19, 2024 and sell it today you would lose (1,155) from holding Eastman Chemical Co or give up 10.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Reliance Industries Ltd  vs.  Eastman Chemical Co

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Reliance Industries and Eastman Chemical

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

The idea behind Reliance Industries Ltd and Eastman Chemical Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.