Correlation Between Sherwin Williams and Eastman Chemical

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

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

Diversification Opportunities for Sherwin Williams and Eastman Chemical

0.26

Correlation Coefficient

Sherwin Williams  Eastman Chemical

Modest diversification

The 3 months correlation between Sherwin and Eastman is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sherwin Williams Co and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Sherwin Williams 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 Sherwin Williams Co 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 Sherwin Williams i.e., Sherwin Williams and Eastman Chemical go up and down completely randomly.

Pair Corralation between Sherwin Williams and Eastman Chemical

Considering the 90-day investment horizon Sherwin Williams Co is expected to generate 0.95 times more return on investment than Eastman Chemical. However, Sherwin Williams Co is 1.06 times less risky than Eastman Chemical. It trades about 0.12 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.07 per unit of risk. If you would invest  35,942  in Sherwin Williams Co on September 5, 2024 and sell it today you would earn a total of  3,590  from holding Sherwin Williams Co or generate 9.99% return on investment over 90 days.

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

Sherwin Williams Co  vs.  Eastman Chemical

Sherwin Williams

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sherwin Williams Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Sherwin Williams may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. 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.

Pair Trading with Sherwin Williams and Eastman Chemical

The main advantage of trading using opposite Sherwin Williams and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sherwin Williams 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 Sherwin Williams Co and Eastman Chemical 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.