Correlation Between Goodyear Tire and NN Group
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and NN Group 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 NN Group 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 NN Group NV, you can compare the effects of market volatilities on Goodyear Tire and NN Group 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 NN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and NN Group.
Diversification Opportunities for Goodyear Tire and NN Group
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Goodyear and 2NN is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and NN Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Group NV 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 NN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Group NV has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and NN Group go up and down completely randomly.
Pair Corralation between Goodyear Tire and NN Group
Assuming the 90 days trading horizon Goodyear Tire is expected to generate 1.55 times less return on investment than NN Group. In addition to that, Goodyear Tire is 1.76 times more volatile than NN Group NV. It trades about 0.01 of its total potential returns per unit of risk. NN Group NV is currently generating about 0.04 per unit of volatility. If you would invest 3,465 in NN Group NV on August 29, 2024 and sell it today you would earn a total of 922.00 from holding NN Group NV or generate 26.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. NN Group NV
Performance |
| Timeline |
| Goodyear Tire Rubber |
| NN Group NV |
Goodyear Tire and NN Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and NN Group
The main advantage of trading using opposite Goodyear Tire and NN Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, NN Group 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 NN Group will offset losses from the drop in NN Group's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
| NN Group vs. Goodyear Tire Rubber | NN Group vs. Verizon Communications | NN Group vs. NAKED WINES PLC | NN Group vs. Martin Marietta Materials |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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