Correlation Between Goodyear Tire and Canoo

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

Diversification Opportunities for Goodyear Tire and Canoo

0.32

Correlation Coefficient

Goodyear Tire  Canoo

Weak diversification

The 3 months correlation between Goodyear and Canoo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Canoo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoo Inc 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 Canoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoo Inc has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Canoo go up and down completely randomly.

Pair Corralation between Goodyear Tire and Canoo

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to generate 0.17 times more return on investment than Canoo. However, Goodyear Tire Rubber is 5.97 times less risky than Canoo. It trades about -0.04 of its potential returns per unit of risk. Canoo Inc is currently generating about -0.29 per unit of risk. If you would invest  1,074  in Goodyear Tire Rubber on November 28, 2024 and sell it today you would lose (120.00) from holding Goodyear Tire Rubber or give up 11.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	74.14%
Values	Daily Returns

Goodyear Tire Rubber  vs.  Canoo Inc

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Canoo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canoo Inc 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 technical and fundamental indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Goodyear Tire and Canoo

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

The idea behind Goodyear Tire Rubber and Canoo Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.