Correlation Between Goodyear Tire and SEKISUI CHEMICAL

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

Diversification Opportunities for Goodyear Tire and SEKISUI CHEMICAL

0.75

Correlation Coefficient

Goodyear Tire  SEKISUI CHEMICAL

Poor diversification

The 3 months correlation between Goodyear and SEKISUI is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and SEKISUI CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEKISUI CHEMICAL 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 SEKISUI CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEKISUI CHEMICAL has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and SEKISUI CHEMICAL go up and down completely randomly.

Pair Corralation between Goodyear Tire and SEKISUI CHEMICAL

Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 2.15 times more return on investment than SEKISUI CHEMICAL. However, Goodyear Tire is 2.15 times more volatile than SEKISUI CHEMICAL. It trades about 0.21 of its potential returns per unit of risk. SEKISUI CHEMICAL is currently generating about 0.13 per unit of risk. If you would invest  718.00  in Goodyear Tire Rubber on September 5, 2024 and sell it today you would earn a total of  307.00  from holding Goodyear Tire Rubber or generate 42.76% return on investment over 90 days.

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

Goodyear Tire Rubber  vs.  SEKISUI CHEMICAL

Goodyear Tire Rubber

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goodyear Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.

SEKISUI CHEMICAL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEKISUI CHEMICAL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, SEKISUI CHEMICAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Goodyear Tire and SEKISUI CHEMICAL

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

The idea behind Goodyear Tire Rubber and SEKISUI CHEMICAL 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.