Correlation Between Grupo Hotelero and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both Grupo Hotelero and Goodyear Tire 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 Grupo Hotelero and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Hotelero Santa and The Goodyear Tire, you can compare the effects of market volatilities on Grupo Hotelero and Goodyear Tire 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 Grupo Hotelero with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Hotelero and Goodyear Tire.
Diversification Opportunities for Grupo Hotelero and Goodyear Tire
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Grupo and Goodyear is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and Grupo Hotelero 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 Grupo Hotelero Santa are associated (or correlated) with Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire has no effect on the direction of Grupo Hotelero i.e., Grupo Hotelero and Goodyear Tire go up and down completely randomly.
Pair Corralation between Grupo Hotelero and Goodyear Tire
Assuming the 90 days trading horizon Grupo Hotelero Santa is expected to under-perform the Goodyear Tire. In addition to that, Grupo Hotelero is 1.07 times more volatile than The Goodyear Tire. It trades about -0.27 of its total potential returns per unit of risk. The Goodyear Tire is currently generating about 0.12 per unit of volatility. If you would invest 19,999 in The Goodyear Tire on September 13, 2024 and sell it today you would earn a total of 801.00 from holding The Goodyear Tire or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Hotelero Santa vs. The Goodyear Tire
Performance |
| Timeline |
| Grupo Hotelero Santa |
| Goodyear Tire |
Grupo Hotelero and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Hotelero and Goodyear Tire
The main advantage of trading using opposite Grupo Hotelero and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Hotelero position performs unexpectedly, Goodyear Tire 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 Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.| Grupo Hotelero vs. Verizon Communications | Grupo Hotelero vs. Applied Materials | Grupo Hotelero vs. Grupo Sports World | Grupo Hotelero vs. CVS Health |
| Goodyear Tire vs. KB Home | Goodyear Tire vs. Cognizant Technology Solutions | Goodyear Tire vs. Deutsche Bank Aktiengesellschaft | Goodyear Tire vs. Lloyds Banking Group |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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