Correlation Between Goodyear Tire and United Utilities
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Goodyear Tire and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and United Utilities.
Diversification Opportunities for Goodyear Tire and United Utilities
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Goodyear and United is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and United Utilities go up and down completely randomly.
Pair Corralation between Goodyear Tire and United Utilities
Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 1.46 times more return on investment than United Utilities. However, Goodyear Tire is 1.46 times more volatile than United Utilities Group. It trades about -0.03 of its potential returns per unit of risk. United Utilities Group is currently generating about -0.2 per unit of risk. If you would invest 923.00 in Goodyear Tire Rubber on October 25, 2024 and sell it today you would lose (44.00) from holding Goodyear Tire Rubber or give up 4.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodyear Tire Rubber vs. United Utilities Group
Performance |
| Timeline |
| Goodyear Tire Rubber |
| United Utilities |
Goodyear Tire and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodyear Tire and United Utilities
The main advantage of trading using opposite Goodyear Tire and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Goodyear Tire vs. Martin Marietta Materials | Goodyear Tire vs. Apollo Medical Holdings | Goodyear Tire vs. Materialise NV | Goodyear Tire vs. Vulcan Materials |
| United Utilities vs. American Water Works | United Utilities vs. Guangdong Investment Limited | United Utilities vs. Gelsenwasser AG | United Utilities vs. American States Water |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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