Correlation Between Goodyear Tire and BASF SE
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and BASF SE 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 BASF SE 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 BASF SE, you can compare the effects of market volatilities on Goodyear Tire and BASF SE 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 BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and BASF SE.
Diversification Opportunities for Goodyear Tire and BASF SE
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Goodyear and BASF is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and BASF SE go up and down completely randomly.
Pair Corralation between Goodyear Tire and BASF SE
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 1.36 times more return on investment than BASF SE. However, Goodyear Tire is 1.36 times more volatile than BASF SE. It trades about 0.42 of its potential returns per unit of risk. BASF SE is currently generating about -0.08 per unit of risk. If you would invest 746.00 in Goodyear Tire Rubber on September 5, 2024 and sell it today you would earn a total of 279.00 from holding Goodyear Tire Rubber or generate 37.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. BASF SE
Performance |
| Timeline |
| Goodyear Tire Rubber |
| BASF SE |
Goodyear Tire and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and BASF SE
The main advantage of trading using opposite Goodyear Tire and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| Goodyear Tire vs. Tyson Foods | Goodyear Tire vs. CVW CLEANTECH INC | Goodyear Tire vs. SCANSOURCE | Goodyear Tire vs. Cal Maine Foods |
| BASF SE vs. Goodyear Tire Rubber | BASF SE vs. Compagnie Plastic Omnium | BASF SE vs. Hyster Yale Materials Handling | BASF SE vs. Suntory Beverage Food |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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