Correlation Between Goodyear Tire and Grupo Carso

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

Diversification Opportunities for Goodyear Tire and Grupo Carso

0.24

Correlation Coefficient

Goodyear Tire  Grupo Carso

Modest diversification

The 3 months correlation between Goodyear and Grupo is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Grupo Carso SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Carso SAB 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 Grupo Carso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Carso SAB has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Grupo Carso go up and down completely randomly.

Pair Corralation between Goodyear Tire and Grupo Carso

Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 0.98 times more return on investment than Grupo Carso. However, Goodyear Tire Rubber is 1.02 times less risky than Grupo Carso. It trades about 0.33 of its potential returns per unit of risk. Grupo Carso SAB is currently generating about 0.1 per unit of risk. If you would invest  821.00  in Goodyear Tire Rubber on October 22, 2024 and sell it today you would earn a total of  86.00  from holding Goodyear Tire Rubber or generate 10.48% 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.  Grupo Carso SAB

Goodyear Tire Rubber

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goodyear Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo Carso is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goodyear Tire and Grupo Carso

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

The idea behind Goodyear Tire Rubber and Grupo Carso SAB 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.