Correlation Between Cal Maine and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both Cal Maine 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 Cal Maine and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cal Maine Foods and Goodyear Tire Rubber, you can compare the effects of market volatilities on Cal Maine 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 Cal Maine with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Goodyear Tire.
Diversification Opportunities for Cal Maine and Goodyear Tire
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cal and Goodyear is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods 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 Cal Maine 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 Cal Maine Foods 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 Cal Maine i.e., Cal Maine and Goodyear Tire go up and down completely randomly.
Pair Corralation between Cal Maine and Goodyear Tire
Assuming the 90 days horizon Cal Maine is expected to generate 1.21 times less return on investment than Goodyear Tire. But when comparing it to its historical volatility, Cal Maine Foods is 1.41 times less risky than Goodyear Tire. It trades about 0.31 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 890.00 in Goodyear Tire Rubber on September 7, 2024 and sell it today you would earn a total of 128.00 from holding Goodyear Tire Rubber or generate 14.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cal Maine Foods vs. Goodyear Tire Rubber
Performance |
| Timeline |
| Cal Maine Foods |
| Goodyear Tire Rubber |
Cal Maine and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and Goodyear Tire
The main advantage of trading using opposite Cal Maine and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine 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.| Cal Maine vs. Gamma Communications plc | Cal Maine vs. LG Display Co | Cal Maine vs. Entravision Communications | Cal Maine vs. NURAN WIRELESS INC |
| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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