Correlation Between Goodyear Tire and Compagnie Plastic
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Compagnie Plastic 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 Compagnie Plastic 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 Compagnie Plastic Omnium, you can compare the effects of market volatilities on Goodyear Tire and Compagnie Plastic 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 Compagnie Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Compagnie Plastic.
Diversification Opportunities for Goodyear Tire and Compagnie Plastic
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Goodyear and Compagnie is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Compagnie Plastic go up and down completely randomly.
Pair Corralation between Goodyear Tire and Compagnie Plastic
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 1.38 times more return on investment than Compagnie Plastic. However, Goodyear Tire is 1.38 times more volatile than Compagnie Plastic Omnium. It trades about 0.27 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about -0.16 per unit of risk. If you would invest 788.00 in Goodyear Tire Rubber on August 29, 2024 and sell it today you would earn a total of 175.00 from holding Goodyear Tire Rubber or generate 22.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. Compagnie Plastic Omnium
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Compagnie Plastic Omnium |
Goodyear Tire and Compagnie Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Compagnie Plastic
The main advantage of trading using opposite Goodyear Tire and Compagnie Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Compagnie Plastic 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 Compagnie Plastic will offset losses from the drop in Compagnie Plastic's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
| Compagnie Plastic vs. Superior Plus Corp | Compagnie Plastic vs. NMI Holdings | Compagnie Plastic vs. Origin Agritech | Compagnie Plastic vs. SIVERS SEMICONDUCTORS AB |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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