Correlation Between Goodyear Tire and Gentex

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Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Gentex 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 Gentex 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 Gentex, you can compare the effects of market volatilities on Goodyear Tire and Gentex 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 Gentex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Gentex.

Diversification Opportunities for Goodyear Tire and Gentex

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Goodyear and Gentex is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Gentex go up and down completely randomly.

Pair Corralation between Goodyear Tire and Gentex

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to generate 3.07 times more return on investment than Gentex. However, Goodyear Tire is 3.07 times more volatile than Gentex. It trades about 0.4 of its potential returns per unit of risk. Gentex is currently generating about 0.04 per unit of risk. If you would invest  801.00  in Goodyear Tire Rubber on September 1, 2024 and sell it today you would earn a total of  273.00  from holding Goodyear Tire Rubber or generate 34.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Goodyear Tire Rubber  vs.  Gentex

 Performance 
       Timeline  
Goodyear Tire Rubber 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Goodyear Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.
Gentex 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goodyear Tire and Gentex Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Goodyear Tire and Gentex

The main advantage of trading using opposite Goodyear Tire and Gentex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Gentex 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 Gentex will offset losses from the drop in Gentex's long position.
The idea behind Goodyear Tire Rubber and Gentex 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.
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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