Correlation Between GOODYEAR T and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both GOODYEAR T and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO , you can compare the effects of market volatilities on GOODYEAR T and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and IMPERIAL TOBACCO.
Diversification Opportunities for GOODYEAR T and IMPERIAL TOBACCO
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GOODYEAR and IMPERIAL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of GOODYEAR T i.e., GOODYEAR T and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between GOODYEAR T and IMPERIAL TOBACCO
Assuming the 90 days trading horizon GOODYEAR T is expected to generate 1.88 times less return on investment than IMPERIAL TOBACCO. In addition to that, GOODYEAR T is 2.46 times more volatile than IMPERIAL TOBACCO . It trades about 0.02 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.08 per unit of volatility. If you would invest 2,040 in IMPERIAL TOBACCO on September 5, 2024 and sell it today you would earn a total of 1,015 from holding IMPERIAL TOBACCO or generate 49.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
GOODYEAR T RUBBER vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| GOODYEAR T RUBBER |
| IMPERIAL TOBACCO |
GOODYEAR T and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOODYEAR T and IMPERIAL TOBACCO
The main advantage of trading using opposite GOODYEAR T and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| GOODYEAR T vs. TOTAL GABON | GOODYEAR T vs. Walgreens Boots Alliance | GOODYEAR T vs. Peak Resources Limited |
| IMPERIAL TOBACCO vs. GOODYEAR T RUBBER | IMPERIAL TOBACCO vs. Materialise NV | IMPERIAL TOBACCO vs. APPLIED MATERIALS | IMPERIAL TOBACCO vs. China Resources Beer |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |