Correlation Between Goodyear Tire and TT Electronics

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

Diversification Opportunities for Goodyear Tire and TT Electronics

0.47

Correlation Coefficient

Goodyear Tire  TT Electronics

Very weak diversification

The 3 months correlation between Goodyear and 7TT is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC 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 TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and TT Electronics go up and down completely randomly.

Pair Corralation between Goodyear Tire and TT Electronics

Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 1.71 times more return on investment than TT Electronics. However, Goodyear Tire is 1.71 times more volatile than TT Electronics PLC. It trades about -0.11 of its potential returns per unit of risk. TT Electronics PLC is currently generating about -0.31 per unit of risk. If you would invest  1,018  in Goodyear Tire Rubber on December 5, 2024 and sell it today you would lose (221.00) from holding Goodyear Tire Rubber or give up 21.71% of portfolio value over 90 days.

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

Goodyear Tire Rubber  vs.  TT Electronics PLC

Goodyear Tire Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodyear Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

TT Electronics PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days TT Electronics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Goodyear Tire and TT Electronics

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

The idea behind Goodyear Tire Rubber and TT Electronics PLC 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.