Correlation Between Goodyear Tire and Starbucks
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and Starbucks 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 Starbucks 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 Starbucks, you can compare the effects of market volatilities on Goodyear Tire and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Starbucks.
Diversification Opportunities for Goodyear Tire and Starbucks
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Goodyear and Starbucks is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Starbucks go up and down completely randomly.
Pair Corralation between Goodyear Tire and Starbucks
Assuming the 90 days trading horizon Goodyear Tire is expected to generate 65.81 times less return on investment than Starbucks. In addition to that, Goodyear Tire is 1.04 times more volatile than Starbucks. It trades about 0.01 of its total potential returns per unit of risk. Starbucks is currently generating about 0.34 per unit of volatility. If you would invest 8,984 in Starbucks on November 4, 2024 and sell it today you would earn a total of 1,442 from holding Starbucks or generate 16.05% 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. Starbucks
Performance |
| Timeline |
| Goodyear Tire Rubber |
| Starbucks |
Goodyear Tire and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and Starbucks
The main advantage of trading using opposite Goodyear Tire and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| Goodyear Tire vs. Transport International Holdings | Goodyear Tire vs. USWE SPORTS AB | Goodyear Tire vs. JD SPORTS FASH | Goodyear Tire vs. BII Railway Transportation |
| Starbucks vs. Siemens Healthineers AG | Starbucks vs. Cardinal Health | Starbucks vs. Pure Storage | Starbucks vs. Brockhaus Capital Management |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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