Correlation Between Goodyear Tire and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Costco Wholesale 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 Goodyear Tire and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Goodyear Tire and Costco Wholesale, you can compare the effects of market volatilities on Goodyear Tire and Costco Wholesale 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 Goodyear Tire with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Costco Wholesale.
Diversification Opportunities for Goodyear Tire and Costco Wholesale
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Goodyear and Costco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Goodyear Tire and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Goodyear Tire 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 The Goodyear Tire are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Costco Wholesale go up and down completely randomly.
Pair Corralation between Goodyear Tire and Costco Wholesale
Assuming the 90 days horizon The Goodyear Tire is expected to generate 0.36 times more return on investment than Costco Wholesale. However, The Goodyear Tire is 2.82 times less risky than Costco Wholesale. It trades about 0.22 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.02 per unit of risk. If you would invest 17,700 in The Goodyear Tire on October 25, 2024 and sell it today you would earn a total of 400.00 from holding The Goodyear Tire or generate 2.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Goodyear Tire vs. Costco Wholesale
Performance |
| Timeline |
| Goodyear Tire |
| Costco Wholesale |
Goodyear Tire and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Costco Wholesale
The main advantage of trading using opposite Goodyear Tire and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Goodyear Tire vs. Genworth Financial | Goodyear Tire vs. Cognizant Technology Solutions | Goodyear Tire vs. Ameriprise Financial | Goodyear Tire vs. DXC Technology |
| Costco Wholesale vs. The Home Depot | Costco Wholesale vs. Hoteles City Express | Costco Wholesale vs. KB Home | Costco Wholesale vs. Applied Materials |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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