Correlation Between Goodyear Tire and Xos Equity

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

Diversification Opportunities for Goodyear Tire and Xos Equity

-0.7

Correlation Coefficient

Goodyear Tire  Xos Equity

Excellent diversification

The 3 months correlation between Goodyear and Xos is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Xos Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Equity Warrants 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 Xos Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Equity Warrants has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Xos Equity go up and down completely randomly.

Pair Corralation between Goodyear Tire and Xos Equity

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to generate 0.2 times more return on investment than Xos Equity. However, Goodyear Tire Rubber is 4.91 times less risky than Xos Equity. It trades about 0.17 of its potential returns per unit of risk. Xos Equity Warrants is currently generating about -0.11 per unit of risk. If you would invest  795.00  in Goodyear Tire Rubber on September 5, 2024 and sell it today you would earn a total of  279.00  from holding Goodyear Tire Rubber or generate 35.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.3%
Values	Daily Returns

Goodyear Tire Rubber  vs.  Xos Equity Warrants

Goodyear Tire Rubber

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goodyear Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xos Equity Warrants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xos Equity Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 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 Xos Equity

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

The idea behind Goodyear Tire Rubber and Xos Equity Warrants 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.