Correlation Between Clean Energy and Eastman Chemical

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

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

Diversification Opportunities for Clean Energy and Eastman Chemical

0.1

Correlation Coefficient

Clean Energy  Eastman Chemical

Average diversification

The 3 months correlation between Clean and Eastman is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and Eastman Chemical go up and down completely randomly.

Pair Corralation between Clean Energy and Eastman Chemical

Assuming the 90 days horizon Clean Energy Fuels is expected to under-perform the Eastman Chemical. In addition to that, Clean Energy is 3.11 times more volatile than Eastman Chemical. It trades about -0.03 of its total potential returns per unit of risk. Eastman Chemical is currently generating about -0.04 per unit of volatility. If you would invest  9,570  in Eastman Chemical on September 13, 2024 and sell it today you would lose (140.00) from holding Eastman Chemical or give up 1.46% of portfolio value over 90 days.

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

Clean Energy Fuels  vs.  Eastman Chemical

Clean Energy Fuels

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Clean Energy Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Clean Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite nearly fragile basic indicators, Eastman Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Clean Energy and Eastman Chemical

The main advantage of trading using opposite Clean Energy and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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 Clean Energy Fuels 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.