Correlation Between Federal Home and GOODYEAR T

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

By analyzing existing cross correlation between Federal Home Loan and GOODYEAR T RUBBER, you can compare the effects of market volatilities on Federal Home and GOODYEAR T 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 Federal Home with a short position of GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and GOODYEAR T.

Diversification Opportunities for Federal Home and GOODYEAR T

0.86

Correlation Coefficient

Federal Home  GOODYEAR T

Very poor diversification

The 3 months correlation between Federal and GOODYEAR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER and Federal Home 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 Federal Home Loan are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of Federal Home i.e., Federal Home and GOODYEAR T go up and down completely randomly.

Pair Corralation between Federal Home and GOODYEAR T

Assuming the 90 days horizon Federal Home Loan is expected to generate 2.38 times more return on investment than GOODYEAR T. However, Federal Home is 2.38 times more volatile than GOODYEAR T RUBBER. It trades about 0.26 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about 0.14 per unit of risk. If you would invest  101.00  in Federal Home Loan on September 2, 2024 and sell it today you would earn a total of  197.00  from holding Federal Home Loan or generate 195.05% return on investment over 90 days.

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

Federal Home Loan  vs.  GOODYEAR T RUBBER

Federal Home Loan

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

GOODYEAR T RUBBER

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Home and GOODYEAR T

The main advantage of trading using opposite Federal Home and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, GOODYEAR T 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 T will offset losses from the drop in GOODYEAR T's long position.

The idea behind Federal Home Loan and GOODYEAR T RUBBER 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.