Correlation Between Goodyear Tire and WIMFARM SA
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and WIMFARM SA 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 WIMFARM SA 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 WIMFARM SA EO, you can compare the effects of market volatilities on Goodyear Tire and WIMFARM SA 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 WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and WIMFARM SA.
Diversification Opportunities for Goodyear Tire and WIMFARM SA
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Goodyear and WIMFARM is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO 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 WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and WIMFARM SA go up and down completely randomly.
Pair Corralation between Goodyear Tire and WIMFARM SA
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 0.8 times more return on investment than WIMFARM SA. However, Goodyear Tire Rubber is 1.25 times less risky than WIMFARM SA. It trades about 0.01 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about -0.07 per unit of risk. If you would invest 1,003 in Goodyear Tire Rubber on September 3, 2024 and sell it today you would lose (6.00) from holding Goodyear Tire Rubber or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. WIMFARM SA EO
Performance |
| Timeline |
| Goodyear Tire Rubber |
| WIMFARM SA EO |
Goodyear Tire and WIMFARM SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and WIMFARM SA
The main advantage of trading using opposite Goodyear Tire and WIMFARM SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, WIMFARM SA 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 WIMFARM SA will offset losses from the drop in WIMFARM SA's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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