Correlation Between Goodyear Tire and Workhorse

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

Diversification Opportunities for Goodyear Tire and Workhorse

0.64

Correlation Coefficient

Goodyear Tire  Workhorse

Poor diversification

The 3 months correlation between Goodyear and Workhorse is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Workhorse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workhorse Group 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 Workhorse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workhorse Group has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Workhorse go up and down completely randomly.

Pair Corralation between Goodyear Tire and Workhorse

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to under-perform the Workhorse. But the stock apears to be less risky and, when comparing its historical volatility, Goodyear Tire Rubber is 2.62 times less risky than Workhorse. The stock trades about -0.04 of its potential returns per unit of risk. The Workhorse Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Workhorse Group on September 30, 2024 and sell it today you would lose (57.00) from holding Workhorse Group or give up 41.91% of portfolio value over 90 days.

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

Goodyear Tire Rubber  vs.  Workhorse Group

Goodyear Tire Rubber

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Goodyear Tire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Workhorse Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodyear Tire and Workhorse

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

The idea behind Goodyear Tire Rubber and Workhorse Group 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.