Correlation Between Goodyear Tire and Kronos Worldwide
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Kronos Worldwide 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 Kronos Worldwide 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 Kronos Worldwide, you can compare the effects of market volatilities on Goodyear Tire and Kronos Worldwide 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 Kronos Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Kronos Worldwide.
Diversification Opportunities for Goodyear Tire and Kronos Worldwide
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Goodyear and Kronos is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Kronos Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Worldwide 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 Kronos Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Worldwide has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Kronos Worldwide go up and down completely randomly.
Pair Corralation between Goodyear Tire and Kronos Worldwide
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 1.36 times more return on investment than Kronos Worldwide. However, Goodyear Tire is 1.36 times more volatile than Kronos Worldwide. It trades about 0.39 of its potential returns per unit of risk. Kronos Worldwide is currently generating about 0.06 per unit of risk. If you would invest 751.00 in Goodyear Tire Rubber on September 2, 2024 and sell it today you would earn a total of 246.00 from holding Goodyear Tire Rubber or generate 32.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. Kronos Worldwide
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Kronos Worldwide |
Goodyear Tire and Kronos Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Kronos Worldwide
The main advantage of trading using opposite Goodyear Tire and Kronos Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Kronos Worldwide 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 Kronos Worldwide will offset losses from the drop in Kronos Worldwide's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
| Kronos Worldwide vs. Pembina Pipeline Corp | Kronos Worldwide vs. Perseus Mining Limited | Kronos Worldwide vs. Western Copper and | Kronos Worldwide vs. Goodyear Tire Rubber |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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