Correlation Between Eastman Chemical and Dow

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

Diversification Opportunities for Eastman Chemical and Dow

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Eastman and Dow is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and Dow go up and down completely randomly.

Pair Corralation between Eastman Chemical and Dow

Considering the 90-day investment horizon Eastman Chemical is expected to under-perform the Dow. In addition to that, Eastman Chemical is 1.31 times more volatile than Dow Inc. It trades about -0.27 of its total potential returns per unit of risk. Dow Inc is currently generating about -0.23 per unit of volatility. If you would invest  5,230  in Dow Inc on June 28, 2022 and sell it today you would lose (891.00)  from holding Dow Inc or give up 17.04% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Eastman Chemical  vs.  Dow Inc

 Performance (%) 
       Timeline  
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 weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in October 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Eastman Price Channel

Dow Inc 
Dow Performance
0 of 100
Over the last 90 days Dow Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in October 2022. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Dow Price Channel

Eastman Chemical and Dow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eastman Chemical and Dow

The main advantage of trading using opposite Eastman Chemical and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical position performs unexpectedly, Dow 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 Dow will offset losses from the drop in Dow's long position.
Eastman Chemical vs. Kibush Capital Corp
The idea behind Eastman Chemical and Dow Inc 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.
Dow vs. Kibush Capital Corp
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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