Correlation Between Goodyear Tire and Aterian

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

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

Diversification Opportunities for Goodyear Tire and Aterian

-0.59

Correlation Coefficient

Goodyear Tire  Aterian

Excellent diversification

The 3 months correlation between Goodyear and Aterian is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Aterian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aterian 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 Goodyear Tire Rubber are associated (or correlated) with Aterian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aterian has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Aterian go up and down completely randomly.

Pair Corralation between Goodyear Tire and Aterian

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to under-perform the Aterian. But the stock apears to be less risky and, when comparing its historical volatility, Goodyear Tire Rubber is 1.87 times less risky than Aterian. The stock trades about -0.03 of its potential returns per unit of risk. The Aterian is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Aterian on September 13, 2024 and sell it today you would lose (155.00) from holding Aterian or give up 38.75% of portfolio value over 90 days.

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

Goodyear Tire Rubber  vs.  Aterian

Goodyear Tire Rubber

Risk-Adjusted Performance

11 of 100

Good

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

Aterian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Goodyear Tire and Aterian

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

The idea behind Goodyear Tire Rubber and Aterian 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.