Correlation Between Airports and Goodyear Public

Can any of the company-specific risk be diversified away by investing in both Airports and Goodyear Public 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 Airports and Goodyear Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Airports of Thailand and Goodyear Public, you can compare the effects of market volatilities on Airports and Goodyear Public 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 Airports with a short position of Goodyear Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airports and Goodyear Public.

Diversification Opportunities for Airports and Goodyear Public

-0.37

Correlation Coefficient

Airports  Goodyear Public

Very good diversification

The 3 months correlation between Airports and Goodyear is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Goodyear Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Public and Airports 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 Airports of Thailand are associated (or correlated) with Goodyear Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Public has no effect on the direction of Airports i.e., Airports and Goodyear Public go up and down completely randomly.

Pair Corralation between Airports and Goodyear Public

Assuming the 90 days trading horizon Airports of Thailand is expected to under-perform the Goodyear Public. But the stock apears to be less risky and, when comparing its historical volatility, Airports of Thailand is 1.44 times less risky than Goodyear Public. The stock trades about -0.08 of its potential returns per unit of risk. The Goodyear Public is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  15,400  in Goodyear Public on September 24, 2024 and sell it today you would earn a total of  2,150  from holding Goodyear Public or generate 13.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Airports of Thailand  vs.  Goodyear Public

Airports of Thailand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Goodyear Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Goodyear Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Airports and Goodyear Public

The main advantage of trading using opposite Airports and Goodyear Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airports position performs unexpectedly, Goodyear Public 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 Public will offset losses from the drop in Goodyear Public's long position.

The idea behind Airports of Thailand and Goodyear Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.