Correlation Between Goodyear Tire and Stoneridge

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

Diversification Opportunities for Goodyear Tire and Stoneridge

-0.68

Correlation Coefficient

Goodyear Tire  Stoneridge

Excellent diversification

The 3 months correlation between Goodyear and Stoneridge is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Stoneridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoneridge 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 Stoneridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoneridge has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Stoneridge go up and down completely randomly.

Pair Corralation between Goodyear Tire and Stoneridge

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to generate 0.96 times more return on investment than Stoneridge. However, Goodyear Tire Rubber is 1.04 times less risky than Stoneridge. It trades about -0.06 of its potential returns per unit of risk. Stoneridge is currently generating about -0.06 per unit of risk. If you would invest  907.00  in Goodyear Tire Rubber on September 21, 2024 and sell it today you would lose (48.00) from holding Goodyear Tire Rubber or give up 5.29% of portfolio value over 90 days.

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

Goodyear Tire Rubber  vs.  Stoneridge

Goodyear Tire Rubber

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stoneridge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoneridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Goodyear Tire and Stoneridge

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

The idea behind Goodyear Tire Rubber and Stoneridge 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.