Correlation Between COMMERCIAL VEHICLE and Goodyear Tire

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

By analyzing existing cross correlation between COMMERCIAL VEHICLE and The Goodyear Tire, you can compare the effects of market volatilities on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL VEHICLE and Goodyear Tire.

Diversification Opportunities for COMMERCIAL VEHICLE and Goodyear Tire

-0.87

Correlation Coefficient

COMMERCIAL VEHICLE  Goodyear Tire

Pay attention - limited upside

The 3 months correlation between COMMERCIAL and Goodyear is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and Goodyear Tire go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and Goodyear Tire

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the Goodyear Tire. In addition to that, COMMERCIAL VEHICLE is 1.41 times more volatile than The Goodyear Tire. It trades about -0.04 of its total potential returns per unit of risk. The Goodyear Tire is currently generating about 0.16 per unit of volatility. If you would invest  699.00  in The Goodyear Tire on September 15, 2024 and sell it today you would earn a total of  254.00  from holding The Goodyear Tire or generate 36.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

COMMERCIAL VEHICLE  vs.  The Goodyear Tire

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Goodyear Tire

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goodyear Tire are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Goodyear Tire reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMMERCIAL VEHICLE and Goodyear Tire

The main advantage of trading using opposite COMMERCIAL VEHICLE and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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.

The idea behind COMMERCIAL VEHICLE and The Goodyear Tire 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.