Correlation Between CDL INVESTMENT and GOODYEAR T

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

By analyzing existing cross correlation between CDL INVESTMENT and GOODYEAR T RUBBER, you can compare the effects of market volatilities on CDL INVESTMENT and GOODYEAR T 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 CDL INVESTMENT with a short position of GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDL INVESTMENT and GOODYEAR T.

Diversification Opportunities for CDL INVESTMENT and GOODYEAR T

0.35

Correlation Coefficient

CDL INVESTMENT  GOODYEAR T

Weak diversification

The 3 months correlation between CDL and GOODYEAR is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER and CDL INVESTMENT 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 CDL INVESTMENT are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of CDL INVESTMENT i.e., CDL INVESTMENT and GOODYEAR T go up and down completely randomly.

Pair Corralation between CDL INVESTMENT and GOODYEAR T

Assuming the 90 days trading horizon CDL INVESTMENT is expected to under-perform the GOODYEAR T. But the stock apears to be less risky and, when comparing its historical volatility, CDL INVESTMENT is 2.4 times less risky than GOODYEAR T. The stock trades about -0.04 of its potential returns per unit of risk. The GOODYEAR T RUBBER is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  831.00  in GOODYEAR T RUBBER on December 4, 2024 and sell it today you would earn a total of  11.00  from holding GOODYEAR T RUBBER or generate 1.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CDL INVESTMENT  vs.  GOODYEAR T RUBBER

CDL INVESTMENT

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

GOODYEAR T RUBBER

Risk-Adjusted Performance

Very Weak

Over the last 90 days GOODYEAR T RUBBER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CDL INVESTMENT and GOODYEAR T

The main advantage of trading using opposite CDL INVESTMENT and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDL INVESTMENT position performs unexpectedly, GOODYEAR T 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 T will offset losses from the drop in GOODYEAR T's long position.

The idea behind CDL INVESTMENT and GOODYEAR T 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.