Correlation Between Goodyear Tire and Waste Connections

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

Diversification Opportunities for Goodyear Tire and Waste Connections

0.84

Correlation Coefficient

Goodyear Tire  Waste Connections

Very poor diversification

The 3 months correlation between Goodyear and Waste is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections 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 Waste Connections. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Connections has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Waste Connections go up and down completely randomly.

Pair Corralation between Goodyear Tire and Waste Connections

Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 2.57 times more return on investment than Waste Connections. However, Goodyear Tire is 2.57 times more volatile than Waste Connections. It trades about 0.21 of its potential returns per unit of risk. Waste Connections is currently generating about 0.14 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	Strong
Accuracy	100.0%
Values	Daily Returns

Goodyear Tire Rubber  vs.  Waste Connections

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.

Waste Connections

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Waste Connections may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Goodyear Tire and Waste Connections

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

The idea behind Goodyear Tire Rubber and Waste Connections 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 Global Correlations module to find global opportunities by holding instruments from different markets.