Correlation Between Goodyear Tire and Charoen Pokphand
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Charoen Pokphand 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 Charoen Pokphand 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 Charoen Pokphand Foods, you can compare the effects of market volatilities on Goodyear Tire and Charoen Pokphand 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 Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Charoen Pokphand.
Diversification Opportunities for Goodyear Tire and Charoen Pokphand
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Goodyear and Charoen is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Charoen Pokphand Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Foods 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 Charoen Pokphand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charoen Pokphand Foods has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Charoen Pokphand go up and down completely randomly.
Pair Corralation between Goodyear Tire and Charoen Pokphand
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 0.55 times more return on investment than Charoen Pokphand. However, Goodyear Tire Rubber is 1.8 times less risky than Charoen Pokphand. It trades about 0.13 of its potential returns per unit of risk. Charoen Pokphand Foods is currently generating about -0.06 per unit of risk. If you would invest 846.00 in Goodyear Tire Rubber on October 25, 2024 and sell it today you would earn a total of 33.00 from holding Goodyear Tire Rubber or generate 3.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. Charoen Pokphand Foods
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Charoen Pokphand Foods |
Goodyear Tire and Charoen Pokphand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Charoen Pokphand
The main advantage of trading using opposite Goodyear Tire and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Charoen Pokphand 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 Charoen Pokphand will offset losses from the drop in Charoen Pokphand's long position.| Goodyear Tire vs. Martin Marietta Materials | Goodyear Tire vs. Apollo Medical Holdings | Goodyear Tire vs. Materialise NV | Goodyear Tire vs. Vulcan Materials |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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