Correlation Between Goodyear Tire and Koninklijke Ahold
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Koninklijke Ahold 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 Koninklijke Ahold 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 Koninklijke Ahold Delhaize, you can compare the effects of market volatilities on Goodyear Tire and Koninklijke Ahold 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 Koninklijke Ahold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Koninklijke Ahold.
Diversification Opportunities for Goodyear Tire and Koninklijke Ahold
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goodyear and Koninklijke is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Koninklijke Ahold Delhaize in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Ahold 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 Koninklijke Ahold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Ahold has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Koninklijke Ahold go up and down completely randomly.
Pair Corralation between Goodyear Tire and Koninklijke Ahold
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to under-perform the Koninklijke Ahold. In addition to that, Goodyear Tire is 2.6 times more volatile than Koninklijke Ahold Delhaize. It trades about -0.03 of its total potential returns per unit of risk. Koninklijke Ahold Delhaize is currently generating about 0.1 per unit of volatility. If you would invest 2,519 in Koninklijke Ahold Delhaize on September 14, 2024 and sell it today you would earn a total of 695.00 from holding Koninklijke Ahold Delhaize or generate 27.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. Koninklijke Ahold Delhaize
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Koninklijke Ahold |
Goodyear Tire and Koninklijke Ahold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Koninklijke Ahold
The main advantage of trading using opposite Goodyear Tire and Koninklijke Ahold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Koninklijke Ahold 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 Koninklijke Ahold will offset losses from the drop in Koninklijke Ahold's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
| Koninklijke Ahold vs. Apollo Investment Corp | Koninklijke Ahold vs. Aozora Bank | Koninklijke Ahold vs. Gladstone Investment | Koninklijke Ahold vs. Virtus Investment Partners |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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