Correlation Between Goodyear Tire and Brembo SpA

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

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

Diversification Opportunities for Goodyear Tire and Brembo SpA

0.17

Correlation Coefficient

Goodyear Tire  Brembo SpA

Average diversification

The 3 months correlation between Goodyear and Brembo is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Brembo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brembo SpA 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 Goodyear Tire Rubber are associated (or correlated) with Brembo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brembo SpA has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Brembo SpA go up and down completely randomly.

Pair Corralation between Goodyear Tire and Brembo SpA

Allowing for the 90-day total investment horizon Goodyear Tire is expected to generate 15.42 times less return on investment than Brembo SpA. In addition to that, Goodyear Tire is 2.03 times more volatile than Brembo SpA. It trades about 0.01 of its total potential returns per unit of risk. Brembo SpA is currently generating about 0.22 per unit of volatility. If you would invest  901.00  in Brembo SpA on December 4, 2024 and sell it today you would earn a total of  97.00  from holding Brembo SpA or generate 10.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Goodyear Tire Rubber  vs.  Brembo SpA

Goodyear Tire Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodyear Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Brembo SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brembo SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Brembo SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodyear Tire and Brembo SpA

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

The idea behind Goodyear Tire Rubber and Brembo SpA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.