Correlation Between Goodyear Tire and Optec International

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

Diversification Opportunities for Goodyear Tire and Optec International

-0.15

Correlation Coefficient

Goodyear Tire  Optec International

Good diversification

The 3 months correlation between Goodyear and Optec is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Optec International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optec International 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 Optec International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optec International has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Optec International go up and down completely randomly.

Pair Corralation between Goodyear Tire and Optec International

If you would invest  942.00  in Goodyear Tire Rubber on September 13, 2024 and sell it today you would earn a total of  68.00  from holding Goodyear Tire Rubber or generate 7.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Goodyear Tire Rubber  vs.  Optec International

Goodyear Tire Rubber

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Goodyear Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Optec International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optec International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Optec International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Goodyear Tire and Optec International

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

The idea behind Goodyear Tire Rubber and Optec International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.