Correlation Between Eastman Chemical and STMicroelectronics

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

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

Diversification Opportunities for Eastman Chemical and STMicroelectronics

0.41

Correlation Coefficient

Eastman Chemical  STMicroelectronics

Very weak diversification

The 3 months correlation between Eastman and STMicroelectronics is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Eastman Chemical i.e., Eastman Chemical and STMicroelectronics go up and down completely randomly.

Pair Corralation between Eastman Chemical and STMicroelectronics

Assuming the 90 days trading horizon Eastman Chemical is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Chemical is 2.4 times less risky than STMicroelectronics. The stock trades about -0.01 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  12,533  in STMicroelectronics NV on April 23, 2025 and sell it today you would earn a total of  4,999  from holding STMicroelectronics NV or generate 39.89% return on investment over 90 days.

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

Eastman Chemical  vs.  STMicroelectronics NV

Eastman Chemical

Risk-Adjusted Performance

Very Weak

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

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, STMicroelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Chemical and STMicroelectronics

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

The idea behind Eastman Chemical and STMicroelectronics NV 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.