Correlation Between Citigroup and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and The Goodyear Tire, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Goodyear Tire.
Diversification Opportunities for Citigroup and Goodyear Tire
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Citigroup and Goodyear is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Goodyear Tire go up and down completely randomly.
Pair Corralation between Citigroup and Goodyear Tire
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.25 times less return on investment than Goodyear Tire. But when comparing it to its historical volatility, Citigroup is 2.02 times less risky than Goodyear Tire. It trades about 0.2 of its potential returns per unit of risk. The Goodyear Tire is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 19,999 in The Goodyear Tire on September 13, 2024 and sell it today you would earn a total of 801.00 from holding The Goodyear Tire or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Citigroup vs. The Goodyear Tire
Performance |
| Timeline |
| Citigroup |
| Goodyear Tire |
Citigroup and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Goodyear Tire
The main advantage of trading using opposite Citigroup and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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.| Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal | Citigroup vs. Bank of Nova |
| Goodyear Tire vs. KB Home | Goodyear Tire vs. Cognizant Technology Solutions | Goodyear Tire vs. Deutsche Bank Aktiengesellschaft | Goodyear Tire vs. Lloyds Banking Group |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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