Correlation Between GOODYEAR T and Anheuser-Busch InBev

Can any of the company-specific risk be diversified away by investing in both GOODYEAR T and Anheuser-Busch InBev 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 T and Anheuser-Busch InBev into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GOODYEAR T RUBBER and Anheuser Busch InBev SANV, you can compare the effects of market volatilities on GOODYEAR T and Anheuser-Busch InBev 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 T with a short position of Anheuser-Busch InBev. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and Anheuser-Busch InBev.

Diversification Opportunities for GOODYEAR T and Anheuser-Busch InBev

-0.72

Correlation Coefficient

GOODYEAR T  Anheuser-Busch InBev

Pay attention - limited upside

The 3 months correlation between GOODYEAR and Anheuser-Busch is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and Anheuser Busch InBev SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch InBev and GOODYEAR T 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 T RUBBER are associated (or correlated) with Anheuser-Busch InBev. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch InBev has no effect on the direction of GOODYEAR T i.e., GOODYEAR T and Anheuser-Busch InBev go up and down completely randomly.

Pair Corralation between GOODYEAR T and Anheuser-Busch InBev

Assuming the 90 days trading horizon GOODYEAR T RUBBER is expected to generate 1.82 times more return on investment than Anheuser-Busch InBev. However, GOODYEAR T is 1.82 times more volatile than Anheuser Busch InBev SANV. It trades about 0.09 of its potential returns per unit of risk. Anheuser Busch InBev SANV is currently generating about -0.18 per unit of risk. If you would invest  736.00  in GOODYEAR T RUBBER on October 8, 2024 and sell it today you would earn a total of  112.00  from holding GOODYEAR T RUBBER or generate 15.22% return on investment over 90 days.

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

GOODYEAR T RUBBER  vs.  Anheuser Busch InBev SANV

GOODYEAR T RUBBER

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GOODYEAR T and Anheuser-Busch InBev

The main advantage of trading using opposite GOODYEAR T and Anheuser-Busch InBev positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T position performs unexpectedly, Anheuser-Busch InBev 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 Anheuser-Busch InBev will offset losses from the drop in Anheuser-Busch InBev's long position.

The idea behind GOODYEAR T RUBBER and Anheuser Busch InBev SANV 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.