Correlation Between Bridgestone and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both Bridgestone 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 Bridgestone and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgestone and The Goodyear Tire, you can compare the effects of market volatilities on Bridgestone 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 Bridgestone with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone and Goodyear Tire.
Diversification Opportunities for Bridgestone and Goodyear Tire
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bridgestone and Goodyear is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and Bridgestone 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 Bridgestone 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 Bridgestone i.e., Bridgestone and Goodyear Tire go up and down completely randomly.
Pair Corralation between Bridgestone and Goodyear Tire
Assuming the 90 days horizon Bridgestone is expected to under-perform the Goodyear Tire. But the stock apears to be less risky and, when comparing its historical volatility, Bridgestone is 2.68 times less risky than Goodyear Tire. The stock trades about 0.0 of its potential returns per unit of risk. The The Goodyear Tire is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 764.00 in The Goodyear Tire on August 29, 2024 and sell it today you would earn a total of 193.00 from holding The Goodyear Tire or generate 25.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridgestone vs. The Goodyear Tire
Performance |
| Timeline |
| Bridgestone |
| Goodyear Tire |
Bridgestone and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgestone and Goodyear Tire
The main advantage of trading using opposite Bridgestone and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone 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.| Bridgestone vs. Alfa Financial Software | Bridgestone vs. VITEC SOFTWARE GROUP | Bridgestone vs. UPDATE SOFTWARE | Bridgestone vs. AXWAY SOFTWARE EO |
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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