Correlation Between GOODYEAR T and XLMedia PLC
Can any of the company-specific risk be diversified away by investing in both GOODYEAR T and XLMedia PLC 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 T and XLMedia PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOODYEAR T RUBBER and XLMedia PLC, you can compare the effects of market volatilities on GOODYEAR T and XLMedia PLC 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 T with a short position of XLMedia PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and XLMedia PLC.
Diversification Opportunities for GOODYEAR T and XLMedia PLC
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GOODYEAR and XLMedia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC and GOODYEAR T 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 T RUBBER are associated (or correlated) with XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of GOODYEAR T i.e., GOODYEAR T and XLMedia PLC go up and down completely randomly.
Pair Corralation between GOODYEAR T and XLMedia PLC
Assuming the 90 days trading horizon GOODYEAR T is expected to generate 4.12 times less return on investment than XLMedia PLC. But when comparing it to its historical volatility, GOODYEAR T RUBBER is 2.38 times less risky than XLMedia PLC. It trades about 0.01 of its potential returns per unit of risk. XLMedia PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 17.00 in XLMedia PLC on September 3, 2024 and sell it today you would lose (3.00) from holding XLMedia PLC or give up 17.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOODYEAR T RUBBER vs. XLMedia PLC
Performance |
| Timeline |
| GOODYEAR T RUBBER |
| XLMedia PLC |
GOODYEAR T and XLMedia PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOODYEAR T and XLMedia PLC
The main advantage of trading using opposite GOODYEAR T and XLMedia PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T position performs unexpectedly, XLMedia PLC 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 XLMedia PLC will offset losses from the drop in XLMedia PLC's long position.| GOODYEAR T vs. TOTAL GABON | GOODYEAR T vs. Walgreens Boots Alliance | GOODYEAR T vs. Peak Resources Limited |
| XLMedia PLC vs. Nucletron Electronic Aktiengesellschaft | XLMedia PLC vs. JD SPORTS FASH | XLMedia PLC vs. AOI Electronics Co | XLMedia PLC vs. Universal Display |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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