Correlation Between Goodyear Tire and Flutter Entertainment
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Flutter Entertainment 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 Flutter Entertainment 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 Flutter Entertainment PLC, you can compare the effects of market volatilities on Goodyear Tire and Flutter Entertainment 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 Flutter Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Flutter Entertainment.
Diversification Opportunities for Goodyear Tire and Flutter Entertainment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goodyear and Flutter is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment PLC 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Flutter Entertainment go up and down completely randomly.
Pair Corralation between Goodyear Tire and Flutter Entertainment
Assuming the 90 days trading horizon Goodyear Tire is expected to generate 4.05 times less return on investment than Flutter Entertainment. In addition to that, Goodyear Tire is 1.23 times more volatile than Flutter Entertainment PLC. It trades about 0.01 of its total potential returns per unit of risk. Flutter Entertainment PLC is currently generating about 0.07 per unit of volatility. If you would invest 14,000 in Flutter Entertainment PLC on August 30, 2024 and sell it today you would earn a total of 12,310 from holding Flutter Entertainment PLC or generate 87.93% 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. Flutter Entertainment PLC
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Flutter Entertainment PLC |
Goodyear Tire and Flutter Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Flutter Entertainment
The main advantage of trading using opposite Goodyear Tire and Flutter Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Flutter Entertainment 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 Flutter Entertainment will offset losses from the drop in Flutter Entertainment's long position.| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
| Flutter Entertainment vs. Apple Inc | Flutter Entertainment vs. Apple Inc | Flutter Entertainment vs. Apple Inc | Flutter Entertainment vs. Apple Inc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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