Correlation Between Goodyear Tire and Gentex
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Goodyear Tire Rubber vs. Gentex
Performance |
Timeline |
Goodyear Tire Rubber |
Gentex |
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.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 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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