Correlation Between AEON STORES and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both AEON STORES and Goodyear Tire 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 AEON STORES and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AEON STORES and The Goodyear Tire, you can compare the effects of market volatilities on AEON STORES and Goodyear Tire 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 AEON STORES with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEON STORES and Goodyear Tire.
Diversification Opportunities for AEON STORES and Goodyear Tire
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AEON and Goodyear is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and AEON STORES 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 AEON STORES are associated (or correlated) with Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire has no effect on the direction of AEON STORES i.e., AEON STORES and Goodyear Tire go up and down completely randomly.
Pair Corralation between AEON STORES and Goodyear Tire
Assuming the 90 days trading horizon AEON STORES is expected to under-perform the Goodyear Tire. But the stock apears to be less risky and, when comparing its historical volatility, AEON STORES is 22.89 times less risky than Goodyear Tire. The stock trades about -0.18 of its potential returns per unit of risk. The The Goodyear Tire is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 685.00 in The Goodyear Tire on September 11, 2024 and sell it today you would earn a total of 249.00 from holding The Goodyear Tire or generate 36.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
AEON STORES vs. The Goodyear Tire
Performance |
Timeline |
AEON STORES |
Goodyear Tire |
AEON STORES and Goodyear Tire Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AEON STORES and Goodyear Tire
The main advantage of trading using opposite AEON STORES and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEON STORES position performs unexpectedly, Goodyear Tire 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 Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.AEON STORES vs. Transport International Holdings | AEON STORES vs. Broadridge Financial Solutions | AEON STORES vs. SHIP HEALTHCARE HLDGINC | AEON STORES vs. Bausch Health Companies |
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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 the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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