Correlation Between Aptiv PLC and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both Aptiv PLC 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 Aptiv PLC and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aptiv PLC and Goodyear Tire Rubber, you can compare the effects of market volatilities on Aptiv PLC 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 Aptiv PLC with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and Goodyear Tire.
Diversification Opportunities for Aptiv PLC and Goodyear Tire
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aptiv and Goodyear is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC 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 Aptiv PLC 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 Aptiv PLC 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 Aptiv PLC i.e., Aptiv PLC and Goodyear Tire go up and down completely randomly.
Pair Corralation between Aptiv PLC and Goodyear Tire
Given the investment horizon of 90 days Aptiv PLC is expected to generate 1.28 times less return on investment than Goodyear Tire. But when comparing it to its historical volatility, Aptiv PLC is 1.3 times less risky than Goodyear Tire. It trades about 0.17 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 875.00 in Goodyear Tire Rubber on November 2, 2024 and sell it today you would earn a total of 48.00 from holding Goodyear Tire Rubber or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aptiv PLC vs. Goodyear Tire Rubber
Performance |
| Timeline |
| Aptiv PLC |
| Goodyear Tire Rubber |
Aptiv PLC and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aptiv PLC and Goodyear Tire
The main advantage of trading using opposite Aptiv PLC and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC 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.| Aptiv PLC vs. Allison Transmission Holdings | Aptiv PLC vs. LKQ Corporation | Aptiv PLC vs. Lear Corporation | Aptiv PLC vs. Magna International |
| Goodyear Tire vs. Allison Transmission Holdings | Goodyear Tire vs. Aptiv PLC | Goodyear Tire vs. LKQ Corporation | Goodyear Tire vs. Lear Corporation |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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