Correlation Between Goodyear Tire and Target

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

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

Diversification Opportunities for Goodyear Tire and Target

-0.61

Correlation Coefficient

Goodyear Tire  Target

Excellent diversification

The 3 months correlation between Goodyear and Target is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding The Goodyear Tire and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Goodyear Tire 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 The Goodyear Tire are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Target go up and down completely randomly.

Pair Corralation between Goodyear Tire and Target

Assuming the 90 days horizon The Goodyear Tire is expected to under-perform the Target. In addition to that, Goodyear Tire is 2.12 times more volatile than Target. It trades about -0.18 of its total potential returns per unit of risk. Target is currently generating about 0.0 per unit of volatility. If you would invest  266,675  in Target on September 25, 2024 and sell it today you would lose (275.00) from holding Target or give up 0.1% of portfolio value over 90 days.

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

The Goodyear Tire  vs.  Target

Goodyear Tire

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Goodyear Tire are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Goodyear Tire and Target

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

The idea behind The Goodyear Tire and Target 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.