Correlation Between Goodyear Tire and Douglas Dynamics

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

Diversification Opportunities for Goodyear Tire and Douglas Dynamics

0.33

Correlation Coefficient

Goodyear Tire  Douglas Dynamics

Weak diversification

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

Pair Corralation between Goodyear Tire and Douglas Dynamics

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to generate 2.13 times more return on investment than Douglas Dynamics. However, Goodyear Tire is 2.13 times more volatile than Douglas Dynamics. It trades about 0.04 of its potential returns per unit of risk. Douglas Dynamics is currently generating about 0.03 per unit of risk. If you would invest  890.00  in Goodyear Tire Rubber on December 26, 2024 and sell it today you would earn a total of  44.00  from holding Goodyear Tire Rubber or generate 4.94% return on investment over 90 days.

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

Goodyear Tire Rubber  vs.  Douglas Dynamics

Goodyear Tire Rubber

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Douglas Dynamics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Dynamics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Douglas Dynamics is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Goodyear Tire and Douglas Dynamics

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

The idea behind Goodyear Tire Rubber and Douglas Dynamics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.