Correlation Between Eastman Chemical and Chemours

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

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

Diversification Opportunities for Eastman Chemical and Chemours

-0.24

Correlation Coefficient

Eastman Chemical  Chemours

Very good diversification

The 3 months correlation between Eastman and Chemours is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours and Eastman Chemical 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 Eastman Chemical are associated (or correlated) with Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Chemours go up and down completely randomly.

Pair Corralation between Eastman Chemical and Chemours

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Chemours. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 2.41 times less risky than Chemours. The stock trades about -0.24 of its potential returns per unit of risk. The Chemours Co is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,874  in Chemours Co on January 30, 2024 and sell it today you would lose (142.00) from holding Chemours Co or give up 4.94% of portfolio value over 90 days.

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

Eastman Chemical  vs.  Chemours Co

Eastman Chemical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Eastman Chemical displayed solid returns over the last few months and may actually be approaching a breakup point.

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eastman Chemical and Chemours

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

The idea behind Eastman Chemical and Chemours 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.