Correlation Between Goodyear Tire and EAGLE MATERIALS
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and EAGLE MATERIALS 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 EAGLE MATERIALS 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 EAGLE MATERIALS, you can compare the effects of market volatilities on Goodyear Tire and EAGLE MATERIALS 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 EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and EAGLE MATERIALS.
Diversification Opportunities for Goodyear Tire and EAGLE MATERIALS
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Goodyear and EAGLE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS 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 EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and EAGLE MATERIALS go up and down completely randomly.
Pair Corralation between Goodyear Tire and EAGLE MATERIALS
Assuming the 90 days trading horizon Goodyear Tire is expected to generate 13.08 times less return on investment than EAGLE MATERIALS. In addition to that, Goodyear Tire is 1.48 times more volatile than EAGLE MATERIALS. It trades about 0.01 of its total potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.1 per unit of volatility. If you would invest 12,551 in EAGLE MATERIALS on August 26, 2024 and sell it today you would earn a total of 17,249 from holding EAGLE MATERIALS or generate 137.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. EAGLE MATERIALS
Performance |
| Timeline |
| Goodyear Tire Rubber |
| EAGLE MATERIALS |
Goodyear Tire and EAGLE MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and EAGLE MATERIALS
The main advantage of trading using opposite Goodyear Tire and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, EAGLE MATERIALS 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 EAGLE MATERIALS will offset losses from the drop in EAGLE MATERIALS's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
| EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc | EAGLE MATERIALS vs. Apple Inc |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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