Correlation Between Goodyear Tire and JAPAN AIRLINES
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES, you can compare the effects of market volatilities on Goodyear Tire and JAPAN AIRLINES 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 JAPAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and JAPAN AIRLINES.
Diversification Opportunities for Goodyear Tire and JAPAN AIRLINES
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Goodyear and JAPAN is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and JAPAN AIRLINES go up and down completely randomly.
Pair Corralation between Goodyear Tire and JAPAN AIRLINES
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to under-perform the JAPAN AIRLINES. In addition to that, Goodyear Tire is 2.1 times more volatile than JAPAN AIRLINES. It trades about -0.04 of its total potential returns per unit of risk. JAPAN AIRLINES is currently generating about -0.03 per unit of volatility. If you would invest 1,771 in JAPAN AIRLINES on November 1, 2024 and sell it today you would lose (211.00) from holding JAPAN AIRLINES or give up 11.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. JAPAN AIRLINES
Performance |
| Timeline |
| Goodyear Tire Rubber |
| JAPAN AIRLINES |
Goodyear Tire and JAPAN AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and JAPAN AIRLINES
The main advantage of trading using opposite Goodyear Tire and JAPAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, JAPAN AIRLINES 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 JAPAN AIRLINES will offset losses from the drop in JAPAN AIRLINES's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
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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 Stocks Directory module to find actively traded stocks across global markets.
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