Correlation Between Goodyear Tire and TotalEnergies

Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and TotalEnergies 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 TotalEnergies 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 TotalEnergies SE, you can compare the effects of market volatilities on Goodyear Tire and TotalEnergies 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 TotalEnergies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and TotalEnergies.

Diversification Opportunities for Goodyear Tire and TotalEnergies

-0.33

Correlation Coefficient

Goodyear Tire  TotalEnergies

Very good diversification

The 3 months correlation between Goodyear and TotalEnergies is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding The Goodyear Tire and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and TotalEnergies go up and down completely randomly.

Pair Corralation between Goodyear Tire and TotalEnergies

Assuming the 90 days horizon The Goodyear Tire is expected to under-perform the TotalEnergies. In addition to that, Goodyear Tire is 2.01 times more volatile than TotalEnergies SE. It trades about -0.03 of its total potential returns per unit of risk. TotalEnergies SE is currently generating about 0.0 per unit of volatility. If you would invest  114,471  in TotalEnergies SE on September 23, 2024 and sell it today you would lose (491.00) from holding TotalEnergies SE or give up 0.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

The Goodyear Tire  vs.  TotalEnergies SE

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.

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Goodyear Tire and TotalEnergies

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

The idea behind The Goodyear Tire and TotalEnergies SE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.