Correlation Between Goodyear Tire and Nio
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Nio 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 Nio 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 Nio Class A, you can compare the effects of market volatilities on Goodyear Tire and Nio 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 Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Nio.
Diversification Opportunities for Goodyear Tire and Nio
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Goodyear and Nio is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Nio go up and down completely randomly.
Pair Corralation between Goodyear Tire and Nio
Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to under-perform the Nio. But the stock apears to be less risky and, when comparing its historical volatility, Goodyear Tire Rubber is 1.41 times less risky than Nio. The stock trades about -0.02 of its potential returns per unit of risk. The Nio Class A is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 534.00 in Nio Class A on August 30, 2024 and sell it today you would lose (96.00) from holding Nio Class A or give up 17.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. Nio Class A
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Nio Class A |
Goodyear Tire and Nio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Nio
The main advantage of trading using opposite Goodyear Tire and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Nio 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 Nio will offset losses from the drop in Nio'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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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