Correlation Between Grand Canyon and Goodyear Tire

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

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

Diversification Opportunities for Grand Canyon and Goodyear Tire

0.36

Correlation Coefficient

Grand Canyon  Goodyear Tire

Weak diversification

The 3 months correlation between Grand and Goodyear is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and Goodyear Tire go up and down completely randomly.

Pair Corralation between Grand Canyon and Goodyear Tire

Assuming the 90 days trading horizon Grand Canyon is expected to generate 5.06 times less return on investment than Goodyear Tire. But when comparing it to its historical volatility, Grand Canyon Education is 2.41 times less risky than Goodyear Tire. It trades about 0.01 of its potential returns per unit of risk. The Goodyear Tire is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  847.00  in The Goodyear Tire on December 27, 2024 and sell it today you would earn a total of  25.00  from holding The Goodyear Tire or generate 2.95% return on investment over 90 days.

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

Grand Canyon Education  vs.  The Goodyear Tire

Grand Canyon Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Grand Canyon is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Goodyear Tire

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Goodyear Tire are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Grand Canyon and Goodyear Tire

The main advantage of trading using opposite Grand Canyon and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education and The Goodyear Tire 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..