Correlation Between Goodyear Tire and Autoliv
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Autoliv 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 Autoliv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goodyear Tire Rubber and Autoliv, you can compare the effects of market volatilities on Goodyear Tire and Autoliv 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 Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Autoliv.
Diversification Opportunities for Goodyear Tire and Autoliv
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Goodyear and Autoliv is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv 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 Goodyear Tire Rubber are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Autoliv go up and down completely randomly.
Pair Corralation between Goodyear Tire and Autoliv
Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to generate 1.76 times more return on investment than Autoliv. However, Goodyear Tire is 1.76 times more volatile than Autoliv. It trades about 0.14 of its potential returns per unit of risk. Autoliv is currently generating about 0.07 per unit of risk. If you would invest 885.00 in Goodyear Tire Rubber on August 30, 2024 and sell it today you would earn a total of 176.00 from holding Goodyear Tire Rubber or generate 19.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. Autoliv
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Autoliv |
Goodyear Tire and Autoliv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Autoliv
The main advantage of trading using opposite Goodyear Tire and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Autoliv 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 Autoliv will offset losses from the drop in Autoliv's long position.| Goodyear Tire vs. Allison Transmission Holdings | Goodyear Tire vs. Aptiv PLC | Goodyear Tire vs. LKQ Corporation | Goodyear Tire vs. Lear 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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