Correlation Between Goodyear Tire and Xpel

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

Diversification Opportunities for Goodyear Tire and Xpel

0.01

Correlation Coefficient

Goodyear Tire  Xpel

Significant diversification

The 3 months correlation between Goodyear and Xpel is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Xpel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xpel 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 Xpel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xpel Inc has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Xpel go up and down completely randomly.

Pair Corralation between Goodyear Tire and Xpel

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to generate 1.1 times more return on investment than Xpel. However, Goodyear Tire is 1.1 times more volatile than Xpel Inc. It trades about 0.04 of its potential returns per unit of risk. Xpel Inc is currently generating about -0.11 per unit of risk. If you would invest  862.00  in Goodyear Tire Rubber on December 20, 2024 and sell it today you would earn a total of  42.00  from holding Goodyear Tire Rubber or generate 4.87% return on investment over 90 days.

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

Goodyear Tire Rubber  vs.  Xpel Inc

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.

Xpel Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xpel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Goodyear Tire and Xpel

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

The idea behind Goodyear Tire Rubber and Xpel 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.