Correlation Between Dana and Bridgestone Corp
Can any of the company-specific risk be diversified away by investing in both Dana and Bridgestone Corp 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 Dana and Bridgestone Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and Bridgestone Corp ADR, you can compare the effects of market volatilities on Dana and Bridgestone Corp 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 Dana with a short position of Bridgestone Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and Bridgestone Corp.
Diversification Opportunities for Dana and Bridgestone Corp
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dana and Bridgestone is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Bridgestone Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone Corp ADR and Dana 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 Dana Inc are associated (or correlated) with Bridgestone Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone Corp ADR has no effect on the direction of Dana i.e., Dana and Bridgestone Corp go up and down completely randomly.
Pair Corralation between Dana and Bridgestone Corp
Considering the 90-day investment horizon Dana Inc is expected to under-perform the Bridgestone Corp. In addition to that, Dana is 2.38 times more volatile than Bridgestone Corp ADR. It trades about -0.06 of its total potential returns per unit of risk. Bridgestone Corp ADR is currently generating about -0.13 per unit of volatility. If you would invest 2,198 in Bridgestone Corp ADR on August 29, 2024 and sell it today you would lose (456.00) from holding Bridgestone Corp ADR or give up 20.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dana Inc vs. Bridgestone Corp ADR
Performance |
| Timeline |
| Dana Inc |
| Bridgestone Corp ADR |
Dana and Bridgestone Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dana and Bridgestone Corp
The main advantage of trading using opposite Dana and Bridgestone Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana position performs unexpectedly, Bridgestone Corp 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 Bridgestone Corp will offset losses from the drop in Bridgestone Corp's long position.The idea behind Dana Inc and Bridgestone Corp ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Bridgestone Corp vs. Continental AG PK | Bridgestone Corp vs. Compagnie Generale des | Bridgestone Corp vs. Denso Corp ADR | Bridgestone Corp vs. Subaru Corp ADR |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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