Correlation Between Bridgestone and Essentra Plc
Can any of the company-specific risk be diversified away by investing in both Bridgestone and Essentra Plc 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 Essentra Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgestone and Essentra plc, you can compare the effects of market volatilities on Bridgestone and Essentra Plc 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 Essentra Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone and Essentra Plc.
Diversification Opportunities for Bridgestone and Essentra Plc
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bridgestone and Essentra is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone and Essentra plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essentra plc 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 Essentra Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essentra plc has no effect on the direction of Bridgestone i.e., Bridgestone and Essentra Plc go up and down completely randomly.
Pair Corralation between Bridgestone and Essentra Plc
Assuming the 90 days horizon Bridgestone is expected to generate 0.96 times more return on investment than Essentra Plc. However, Bridgestone is 1.04 times less risky than Essentra Plc. It trades about 0.11 of its potential returns per unit of risk. Essentra plc is currently generating about -0.02 per unit of risk. If you would invest 3,236 in Bridgestone on September 1, 2024 and sell it today you would earn a total of 113.00 from holding Bridgestone or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bridgestone vs. Essentra plc
Performance |
| Timeline |
| Bridgestone |
| Essentra plc |
Bridgestone and Essentra Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgestone and Essentra Plc
The main advantage of trading using opposite Bridgestone and Essentra Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone position performs unexpectedly, Essentra Plc 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 Essentra Plc will offset losses from the drop in Essentra Plc's long position.| Bridgestone vs. Sabra Health Care | Bridgestone vs. LIFENET INSURANCE CO | Bridgestone vs. Bumrungrad Hospital Public | Bridgestone vs. Cardinal Health |
| Essentra Plc vs. Bridgestone | Essentra Plc vs. The Goodyear Tire | Essentra Plc vs. Sumitomo Rubber Industries | Essentra Plc vs. Zeon 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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