Correlation Between Goodyear Tire and Adidas AG
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Adidas AG 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 Adidas AG 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 adidas AG, you can compare the effects of market volatilities on Goodyear Tire and Adidas AG 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 Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Adidas AG.
Diversification Opportunities for Goodyear Tire and Adidas AG
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Goodyear and Adidas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Adidas AG go up and down completely randomly.
Pair Corralation between Goodyear Tire and Adidas AG
Assuming the 90 days trading horizon Goodyear Tire is expected to generate 127.2 times less return on investment than Adidas AG. In addition to that, Goodyear Tire is 1.22 times more volatile than adidas AG. It trades about 0.0 of its total potential returns per unit of risk. adidas AG is currently generating about 0.06 per unit of volatility. If you would invest 7,341 in adidas AG on October 14, 2024 and sell it today you would earn a total of 4,859 from holding adidas AG or generate 66.19% 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. adidas AG
Performance |
| Timeline |
| Goodyear Tire Rubber |
| adidas AG |
Goodyear Tire and Adidas AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Adidas AG
The main advantage of trading using opposite Goodyear Tire and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.| Goodyear Tire vs. Cass Information Systems | Goodyear Tire vs. Yuexiu Transport Infrastructure | Goodyear Tire vs. Teradata Corp | Goodyear Tire vs. Pure Storage |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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