Correlation Between Brunswick and Goodyear

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

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

Diversification Opportunities for Brunswick and Goodyear

0.27

Correlation Coefficient

Brunswick  Goodyear

Modest diversification

The 3 months correlation between Brunswick and Goodyear is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick 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 Brunswick 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 Brunswick are associated (or correlated) with Goodyear. 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 Brunswick i.e., Brunswick and Goodyear go up and down completely randomly.

Pair Corralation between Brunswick and Goodyear

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Goodyear. In addition to that, Brunswick is 4.53 times more volatile than Goodyear Tire Rubber. It trades about -0.13 of its total potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.02 per unit of volatility. If you would invest  9,848  in Goodyear Tire Rubber on December 30, 2024 and sell it today you would earn a total of  48.00  from holding Goodyear Tire Rubber or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Brunswick  vs.  Goodyear Tire Rubber

Brunswick

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Goodyear Tire Rubber

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Goodyear is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brunswick and Goodyear

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

The idea behind Brunswick 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.