Correlation Between Summit Materials and Eastman Chemical

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

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

Diversification Opportunities for Summit Materials and Eastman Chemical

-0.82

Correlation Coefficient

Summit Materials  Eastman Chemical

Pay attention - limited upside

The 3 months correlation between Summit and Eastman is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and Eastman Chemical go up and down completely randomly.

Pair Corralation between Summit Materials and Eastman Chemical

Considering the 90-day investment horizon Summit Materials is expected to generate 1.41 times more return on investment than Eastman Chemical. However, Summit Materials is 1.41 times more volatile than Eastman Chemical. It trades about 0.22 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.18 per unit of risk. If you would invest  3,898  in Summit Materials on September 21, 2024 and sell it today you would earn a total of  1,137  from holding Summit Materials or generate 29.17% return on investment over 90 days.

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

Summit Materials  vs.  Eastman Chemical

Summit Materials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Summit Materials and Eastman Chemical

The main advantage of trading using opposite Summit Materials and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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 Summit Materials 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.