Correlation Between Goodyear Tire and GM
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and GM 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 GM 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 General Motors, you can compare the effects of market volatilities on Goodyear Tire and GM 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 GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and GM.
Diversification Opportunities for Goodyear Tire and GM
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Goodyear and GM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and GM go up and down completely randomly.
Pair Corralation between Goodyear Tire and GM
Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to under-perform the GM. In addition to that, Goodyear Tire is 1.45 times more volatile than General Motors. It trades about -0.04 of its total potential returns per unit of risk. General Motors is currently generating about 0.14 per unit of volatility. If you would invest 3,210 in General Motors on August 27, 2024 and sell it today you would earn a total of 2,643 from holding General Motors or generate 82.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. General Motors
Performance |
| Timeline |
| Goodyear Tire Rubber |
| General Motors |
Goodyear Tire and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and GM
The main advantage of trading using opposite Goodyear Tire and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, GM 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 GM will offset losses from the drop in GM'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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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