Correlation Between Marketing Worldwide and Bridgestone Corp

Can any of the company-specific risk be diversified away by investing in both Marketing Worldwide and Bridgestone Corp 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 Marketing Worldwide and Bridgestone Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marketing Worldwide and Bridgestone Corp ADR, you can compare the effects of market volatilities on Marketing Worldwide and Bridgestone Corp 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 Marketing Worldwide with a short position of Bridgestone Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marketing Worldwide and Bridgestone Corp.

Diversification Opportunities for Marketing Worldwide and Bridgestone Corp

0.31

Correlation Coefficient

Marketing Worldwide  Bridgestone Corp

Weak diversification

The 3 months correlation between Marketing and Bridgestone is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Marketing Worldwide and Bridgestone Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone Corp ADR and Marketing Worldwide 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 Marketing Worldwide are associated (or correlated) with Bridgestone Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone Corp ADR has no effect on the direction of Marketing Worldwide i.e., Marketing Worldwide and Bridgestone Corp go up and down completely randomly.

Pair Corralation between Marketing Worldwide and Bridgestone Corp

Given the investment horizon of 90 days Marketing Worldwide is expected to generate 39.92 times more return on investment than Bridgestone Corp. However, Marketing Worldwide is 39.92 times more volatile than Bridgestone Corp ADR. It trades about 0.15 of its potential returns per unit of risk. Bridgestone Corp ADR is currently generating about -0.08 per unit of risk. If you would invest  0.02  in Marketing Worldwide on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Marketing Worldwide or generate 0.0% return on investment over 90 days.

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

Marketing Worldwide  vs.  Bridgestone Corp ADR

Marketing Worldwide

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marketing Worldwide are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Marketing Worldwide exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bridgestone Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgestone Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Bridgestone Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Marketing Worldwide and Bridgestone Corp

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

The idea behind Marketing Worldwide and Bridgestone Corp ADR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.