Correlation Between AXA SA and Goodyear Tire

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

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

Diversification Opportunities for AXA SA and Goodyear Tire

0.05

Correlation Coefficient

AXA SA  Goodyear Tire

Significant diversification

The 3 months correlation between AXA and Goodyear is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber and AXA SA 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 AXA SA 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 Rubber has no effect on the direction of AXA SA i.e., AXA SA and Goodyear Tire go up and down completely randomly.

Pair Corralation between AXA SA and Goodyear Tire

Assuming the 90 days trading horizon AXA SA is expected to generate 0.33 times more return on investment than Goodyear Tire. However, AXA SA is 3.04 times less risky than Goodyear Tire. It trades about 0.29 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.01 per unit of risk. If you would invest  3,346  in AXA SA on December 21, 2024 and sell it today you would earn a total of  645.00  from holding AXA SA or generate 19.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

AXA SA  vs.  Goodyear Tire Rubber

AXA SA

Risk-Adjusted Performance

Solid

Over the last 90 days AXA SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, AXA SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Goodyear Tire Rubber

Risk-Adjusted Performance

Weak

Over the last 90 days Goodyear Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Goodyear Tire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AXA SA and Goodyear Tire

The main advantage of trading using opposite AXA SA and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXA SA 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.

The idea behind AXA SA and Goodyear Tire Rubber 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.