Correlation Between Goodyear Tire and Madison Square
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Madison Square 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 Madison Square 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 Madison Square Garden, you can compare the effects of market volatilities on Goodyear Tire and Madison Square 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 Madison Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Madison Square.
Diversification Opportunities for Goodyear Tire and Madison Square
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goodyear and Madison is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden 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 Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Madison Square go up and down completely randomly.
Pair Corralation between Goodyear Tire and Madison Square
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 2.21 times more return on investment than Madison Square. However, Goodyear Tire is 2.21 times more volatile than Madison Square Garden. It trades about 0.46 of its potential returns per unit of risk. Madison Square Garden is currently generating about 0.2 per unit of risk. If you would invest 746.00 in Goodyear Tire Rubber on September 4, 2024 and sell it today you would earn a total of 296.00 from holding Goodyear Tire Rubber or generate 39.68% 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. Madison Square Garden
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Madison Square Garden |
Goodyear Tire and Madison Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Madison Square
The main advantage of trading using opposite Goodyear Tire and Madison Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Madison Square 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 Madison Square will offset losses from the drop in Madison Square's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
| Madison Square vs. Li Ning Company | Madison Square vs. SHIMANO INC UNSPADR10 | Madison Square vs. Superior Plus Corp | Madison Square vs. NMI Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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