Correlation Between GOODYEAR T and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both GOODYEAR T and STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS, you can compare the effects of market volatilities on GOODYEAR T and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and STMICROELECTRONICS.
Diversification Opportunities for GOODYEAR T and STMICROELECTRONICS
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GOODYEAR and STMICROELECTRONICS is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of GOODYEAR T i.e., GOODYEAR T and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between GOODYEAR T and STMICROELECTRONICS
Assuming the 90 days trading horizon GOODYEAR T RUBBER is expected to generate 1.28 times more return on investment than STMICROELECTRONICS. However, GOODYEAR T is 1.28 times more volatile than STMICROELECTRONICS. It trades about 0.0 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.04 per unit of risk. If you would invest 1,058 in GOODYEAR T RUBBER on October 25, 2024 and sell it today you would lose (180.00) from holding GOODYEAR T RUBBER or give up 17.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOODYEAR T RUBBER vs. STMICROELECTRONICS
Performance |
| Timeline |
| GOODYEAR T RUBBER |
| STMICROELECTRONICS |
GOODYEAR T and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOODYEAR T and STMICROELECTRONICS
The main advantage of trading using opposite GOODYEAR T and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| GOODYEAR T vs. ANTA SPORTS PRODUCT | GOODYEAR T vs. THAI BEVERAGE | GOODYEAR T vs. TreeHouse Foods | GOODYEAR T vs. CAL MAINE FOODS |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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