Correlation Between Renesas Electronics and Goodyear Tire

Can any of the company-specific risk be diversified away by investing in both Renesas Electronics and Goodyear Tire 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 Renesas Electronics and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Renesas Electronics and Goodyear Tire Rubber, you can compare the effects of market volatilities on Renesas Electronics and Goodyear Tire 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 Renesas Electronics with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renesas Electronics and Goodyear Tire.

Diversification Opportunities for Renesas Electronics and Goodyear Tire

-0.47

Correlation Coefficient

Renesas Electronics  Goodyear Tire

Very good diversification

The 3 months correlation between Renesas and Goodyear is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber and Renesas Electronics 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 Renesas Electronics are associated (or correlated) with Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and Goodyear Tire go up and down completely randomly.

Pair Corralation between Renesas Electronics and Goodyear Tire

Assuming the 90 days horizon Renesas Electronics is expected to under-perform the Goodyear Tire. But the stock apears to be less risky and, when comparing its historical volatility, Renesas Electronics is 1.03 times less risky than Goodyear Tire. The stock trades about -0.1 of its potential returns per unit of risk. The Goodyear Tire Rubber is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  763.00  in Goodyear Tire Rubber on September 3, 2024 and sell it today you would earn a total of  234.00  from holding Goodyear Tire Rubber or generate 30.67% return on investment over 90 days.

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

Renesas Electronics  vs.  Goodyear Tire Rubber

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Goodyear Tire Rubber

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Renesas Electronics and Goodyear Tire

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

The idea behind Renesas Electronics and Goodyear Tire Rubber 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.