Correlation Between Goodyear Tire and ECARX Holdings

Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and ECARX Holdings 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 ECARX Holdings 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 ECARX Holdings Class, you can compare the effects of market volatilities on Goodyear Tire and ECARX Holdings 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 ECARX Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and ECARX Holdings.

Diversification Opportunities for Goodyear Tire and ECARX Holdings

0.26

Correlation Coefficient

Goodyear Tire  ECARX Holdings

Modest diversification

The 3 months correlation between Goodyear and ECARX is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and ECARX Holdings Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Class 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 ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Class has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and ECARX Holdings go up and down completely randomly.

Pair Corralation between Goodyear Tire and ECARX Holdings

Allowing for the 90-day total investment horizon Goodyear Tire is expected to generate 1.55 times less return on investment than ECARX Holdings. But when comparing it to its historical volatility, Goodyear Tire Rubber is 1.25 times less risky than ECARX Holdings. It trades about 0.02 of its potential returns per unit of risk. ECARX Holdings Class is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  191.00  in ECARX Holdings Class on September 27, 2024 and sell it today you would earn a total of  4.00  from holding ECARX Holdings Class or generate 2.09% return on investment over 90 days.

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

Goodyear Tire Rubber  vs.  ECARX Holdings Class

Goodyear Tire Rubber

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Goodyear Tire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ECARX Holdings Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, ECARX Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Goodyear Tire and ECARX Holdings

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

The idea behind Goodyear Tire Rubber and ECARX Holdings Class 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.