Correlation Between Amazon and Eastman Chemical

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Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Eastman Chemical, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Eastman Chemical.

Diversification Opportunities for Amazon and Eastman Chemical

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between Amazon and Eastman is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Eastman Chemical go up and down completely randomly.

Pair Corralation between Amazon and Eastman Chemical

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Eastman Chemical. In addition to that, Amazon is 1.15 times more volatile than Eastman Chemical. It trades about -0.13 of its total potential returns per unit of risk. Eastman Chemical is currently generating about 0.01 per unit of volatility. If you would invest  8,887  in Eastman Chemical on September 5, 2022 and sell it today you would lose (135.00)  from holding Eastman Chemical or give up 1.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Eastman Chemical

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Eastman Chemical 
Eastman Performance
0 of 100
Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Eastman Chemical is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Eastman Price Channel

Amazon and Eastman Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Eastman Chemical

The main advantage of trading using opposite Amazon and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon Inc 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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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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