Correlation Between Compagnie and GOODYEAR T

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

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

Diversification Opportunities for Compagnie and GOODYEAR T

0.73

Correlation Coefficient

Compagnie  GOODYEAR T

Poor diversification

The 3 months correlation between Compagnie and GOODYEAR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain 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 Compagnie 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 Compagnie de Saint Gobain 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 Compagnie i.e., Compagnie and GOODYEAR T go up and down completely randomly.

Pair Corralation between Compagnie and GOODYEAR T

Assuming the 90 days horizon Compagnie is expected to generate 3.65 times less return on investment than GOODYEAR T. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 2.06 times less risky than GOODYEAR T. It trades about 0.1 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  747.00  in GOODYEAR T RUBBER on September 4, 2024 and sell it today you would earn a total of  288.00  from holding GOODYEAR T RUBBER or generate 38.55% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  GOODYEAR T RUBBER

Compagnie de Saint

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GOODYEAR T RUBBER

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and GOODYEAR T

The main advantage of trading using opposite Compagnie and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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 Compagnie de Saint Gobain 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.