Correlation Between Goodyear Tire and Amgen

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

Diversification Opportunities for Goodyear Tire and Amgen

-0.56

Correlation Coefficient

Goodyear Tire  Amgen

Excellent diversification

The 3 months correlation between Goodyear and Amgen is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Amgen go up and down completely randomly.

Pair Corralation between Goodyear Tire and Amgen

Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to under-perform the Amgen. In addition to that, Goodyear Tire is 2.42 times more volatile than Amgen Inc. It trades about -0.39 of its total potential returns per unit of risk. Amgen Inc is currently generating about -0.26 per unit of volatility. If you would invest  25,775  in Amgen Inc on October 10, 2024 and sell it today you would lose (1,000.00) from holding Amgen Inc or give up 3.88% of portfolio value over 90 days.

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

Goodyear Tire Rubber  vs.  Amgen Inc

Goodyear Tire Rubber

Risk-Adjusted Performance

3 of 100

Modest

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 fragile basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amgen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amgen Inc 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Goodyear Tire and Amgen

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

The idea behind Goodyear Tire Rubber and Amgen 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.