Correlation Between Goodyear Tire and ADHI KARYA
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and ADHI KARYA 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 ADHI KARYA 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 ADHI KARYA, you can compare the effects of market volatilities on Goodyear Tire and ADHI KARYA 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 ADHI KARYA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and ADHI KARYA.
Diversification Opportunities for Goodyear Tire and ADHI KARYA
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goodyear and ADHI is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and ADHI KARYA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADHI KARYA 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 ADHI KARYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADHI KARYA has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and ADHI KARYA go up and down completely randomly.
Pair Corralation between Goodyear Tire and ADHI KARYA
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to under-perform the ADHI KARYA. But the stock apears to be less risky and, when comparing its historical volatility, Goodyear Tire Rubber is 29.56 times less risky than ADHI KARYA. The stock trades about -0.02 of its potential returns per unit of risk. The ADHI KARYA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.55 in ADHI KARYA on September 2, 2024 and sell it today you would earn a total of 0.65 from holding ADHI KARYA or generate 118.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. ADHI KARYA
Performance |
| Timeline |
| Goodyear Tire Rubber |
| ADHI KARYA |
Goodyear Tire and ADHI KARYA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and ADHI KARYA
The main advantage of trading using opposite Goodyear Tire and ADHI KARYA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, ADHI KARYA 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 ADHI KARYA will offset losses from the drop in ADHI KARYA'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 Global Correlations module to find global opportunities by holding instruments from different markets.
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