Correlation Between Goodyear Tire and Fibra Plus

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

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

Diversification Opportunities for Goodyear Tire and Fibra Plus

-0.76

Correlation Coefficient

Goodyear Tire  Fibra Plus

Pay attention - limited upside

The 3 months correlation between Goodyear and Fibra is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Goodyear Tire and Fibra Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Plus and Goodyear Tire 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 The Goodyear Tire are associated (or correlated) with Fibra Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Plus has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Fibra Plus go up and down completely randomly.

Pair Corralation between Goodyear Tire and Fibra Plus

Assuming the 90 days horizon Goodyear Tire is expected to generate 1.84 times less return on investment than Fibra Plus. But when comparing it to its historical volatility, The Goodyear Tire is 1.4 times less risky than Fibra Plus. It trades about 0.07 of its potential returns per unit of risk. Fibra Plus is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  595.00  in Fibra Plus on September 23, 2024 and sell it today you would earn a total of  68.00  from holding Fibra Plus or generate 11.43% return on investment over 90 days.

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

The Goodyear Tire  vs.  Fibra Plus

Goodyear Tire

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Goodyear Tire are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fibra Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fibra Plus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fibra Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goodyear Tire and Fibra Plus

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

The idea behind The Goodyear Tire and Fibra Plus 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.