Correlation Between 538034AN9 and Eastman Chemical

Can any of the company-specific risk be diversified away by investing in both 538034AN9 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 538034AN9 and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Live Nation Entertainment and Eastman Chemical, you can compare the effects of market volatilities on 538034AN9 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 538034AN9 with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of 538034AN9 and Eastman Chemical.

Diversification Opportunities for 538034AN9 and Eastman Chemical

0.36

Correlation Coefficient

538034AN9  Eastman Chemical

Weak diversification

The 3 months correlation between 538034AN9 and Eastman is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and 538034AN9 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 Live Nation Entertainment 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 538034AN9 i.e., 538034AN9 and Eastman Chemical go up and down completely randomly.

Pair Corralation between 538034AN9 and Eastman Chemical

Assuming the 90 days trading horizon Live Nation Entertainment is expected to generate 0.79 times more return on investment than Eastman Chemical. However, Live Nation Entertainment is 1.27 times less risky than Eastman Chemical. It trades about -0.01 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.03 per unit of risk. If you would invest  9,972  in Live Nation Entertainment on September 13, 2024 and sell it today you would lose (68.00) from holding Live Nation Entertainment or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

Live Nation Entertainment  vs.  Eastman Chemical

Live Nation Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Nation Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 538034AN9 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with 538034AN9 and Eastman Chemical

The main advantage of trading using opposite 538034AN9 and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 538034AN9 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 Live Nation Entertainment 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.