Correlation Between PICKN PAY and Goodyear Tire

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

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

Diversification Opportunities for PICKN PAY and Goodyear Tire

0.63

Correlation Coefficient

PICKN PAY  Goodyear Tire

Poor diversification

The 3 months correlation between PICKN and Goodyear is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PICKN PAY STORES and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and PICKN PAY 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 PICKN PAY STORES 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 has no effect on the direction of PICKN PAY i.e., PICKN PAY and Goodyear Tire go up and down completely randomly.

Pair Corralation between PICKN PAY and Goodyear Tire

Assuming the 90 days trading horizon PICKN PAY is expected to generate 1.22 times less return on investment than Goodyear Tire. But when comparing it to its historical volatility, PICKN PAY STORES is 1.05 times less risky than Goodyear Tire. It trades about 0.17 of its potential returns per unit of risk. The Goodyear Tire is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  723.00  in The Goodyear Tire on September 7, 2024 and sell it today you would earn a total of  316.00  from holding The Goodyear Tire or generate 43.71% return on investment over 90 days.

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

PICKN PAY STORES  vs.  The Goodyear Tire

PICKN PAY STORES

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PICKN PAY STORES are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, PICKN PAY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Goodyear Tire

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Goodyear Tire are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Goodyear Tire reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PICKN PAY and Goodyear Tire

The main advantage of trading using opposite PICKN PAY and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PICKN PAY 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 PICKN PAY STORES and The Goodyear Tire 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.