Correlation Between Goodyear Tire and Worksport

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

Diversification Opportunities for Goodyear Tire and Worksport

0.29

Correlation Coefficient

Goodyear Tire  Worksport

Modest diversification

The 3 months correlation between Goodyear and Worksport is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Worksport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worksport 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 Worksport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worksport has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Worksport go up and down completely randomly.

Pair Corralation between Goodyear Tire and Worksport

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to under-perform the Worksport. But the stock apears to be less risky and, when comparing its historical volatility, Goodyear Tire Rubber is 2.7 times less risky than Worksport. The stock trades about -0.2 of its potential returns per unit of risk. The Worksport is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Worksport on September 26, 2024 and sell it today you would earn a total of  23.00  from holding Worksport or generate 37.7% 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.  Worksport

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 fragile basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Worksport

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Worksport are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Worksport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodyear Tire and Worksport

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

The idea behind Goodyear Tire Rubber and Worksport 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.