Correlation Between American International and GOODYEAR T
Can any of the company-specific risk be diversified away by investing in both American International and GOODYEAR T 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 American International and GOODYEAR T into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American International Group and GOODYEAR T RUBBER, you can compare the effects of market volatilities on American International and GOODYEAR T 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 American International with a short position of GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and GOODYEAR T.
Diversification Opportunities for American International and GOODYEAR T
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and GOODYEAR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER and American International 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 American International Group are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of American International i.e., American International and GOODYEAR T go up and down completely randomly.
Pair Corralation between American International and GOODYEAR T
Assuming the 90 days trading horizon American International Group is expected to generate 0.56 times more return on investment than GOODYEAR T. However, American International Group is 1.78 times less risky than GOODYEAR T. It trades about 0.04 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about 0.02 per unit of risk. If you would invest 5,588 in American International Group on September 5, 2024 and sell it today you would earn a total of 1,631 from holding American International Group or generate 29.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
American International Group vs. GOODYEAR T RUBBER
Performance |
| Timeline |
| American International |
| GOODYEAR T RUBBER |
American International and GOODYEAR T Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American International and GOODYEAR T
The main advantage of trading using opposite American International and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International position performs unexpectedly, GOODYEAR T 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 T will offset losses from the drop in GOODYEAR T's long position.| American International vs. BJs Restaurants | American International vs. CITY OFFICE REIT | American International vs. SWISS WATER DECAFFCOFFEE | American International vs. FIREWEED METALS P |
| GOODYEAR T vs. TOTAL GABON | GOODYEAR T vs. Walgreens Boots Alliance | GOODYEAR T vs. Peak Resources Limited |
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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