Correlation Between Goodyear Tire and Apple

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

Diversification Opportunities for Goodyear Tire and Apple

0.32

Correlation Coefficient

Goodyear Tire  Apple

Weak diversification

The 3 months correlation between Goodyear and Apple is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Apple go up and down completely randomly.

Pair Corralation between Goodyear Tire and Apple

Assuming the 90 days trading horizon Goodyear Tire is expected to generate 3.98 times less return on investment than Apple. In addition to that, Goodyear Tire is 2.99 times more volatile than Apple Inc. It trades about 0.03 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.39 per unit of volatility. If you would invest  20,386  in Apple Inc on October 6, 2024 and sell it today you would earn a total of  3,224  from holding Apple Inc or generate 15.81% 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.  Apple Inc

Goodyear Tire Rubber

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 6 (%) 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.

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodyear Tire and Apple

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

The idea behind Goodyear Tire Rubber and Apple 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.