Correlation Between National Storage and Goodyear Tire

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Can any of the company-specific risk be diversified away by investing in both National Storage 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 National Storage and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Storage Affiliates and The Goodyear Tire, you can compare the effects of market volatilities on National Storage 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 National Storage with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Storage and Goodyear Tire.

Diversification Opportunities for National Storage and Goodyear Tire

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between National and Goodyear is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Storage Affiliates and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and National Storage 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 National Storage Affiliates 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 National Storage i.e., National Storage and Goodyear Tire go up and down completely randomly.

Pair Corralation between National Storage and Goodyear Tire

Assuming the 90 days horizon National Storage Affiliates is expected to generate 0.6 times more return on investment than Goodyear Tire. However, National Storage Affiliates is 1.66 times less risky than Goodyear Tire. It trades about 0.1 of its potential returns per unit of risk. The Goodyear Tire is currently generating about 0.0 per unit of risk. If you would invest  3,213  in National Storage Affiliates on September 1, 2024 and sell it today you would earn a total of  1,062  from holding National Storage Affiliates or generate 33.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.48%
ValuesDaily Returns

National Storage Affiliates  vs.  The Goodyear Tire

 Performance 
       Timeline  
National Storage Aff 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in National Storage Affiliates are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Storage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Goodyear Tire 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Goodyear Tire are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Goodyear Tire reported solid returns over the last few months and may actually be approaching a breakup point.

National Storage and Goodyear Tire Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Storage and Goodyear Tire

The main advantage of trading using opposite National Storage and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage 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 National Storage Affiliates 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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