Correlation Between Goodyear Tire and Air Lease

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

Diversification Opportunities for Goodyear Tire and Air Lease

0.42

Correlation Coefficient

Goodyear Tire  Air Lease

Very weak diversification

The 3 months correlation between Goodyear and Air is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Air Lease go up and down completely randomly.

Pair Corralation between Goodyear Tire and Air Lease

Assuming the 90 days trading horizon Goodyear Tire Rubber is expected to generate 1.57 times more return on investment than Air Lease. However, Goodyear Tire is 1.57 times more volatile than Air Lease. It trades about 0.02 of its potential returns per unit of risk. Air Lease is currently generating about -0.02 per unit of risk. If you would invest  838.00  in Goodyear Tire Rubber on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Goodyear Tire Rubber or generate 0.6% return on investment over 90 days.

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

Goodyear Tire Rubber  vs.  Air Lease

Goodyear Tire Rubber

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Goodyear Tire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Air Lease 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 Air Lease

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

The idea behind Goodyear Tire Rubber and Air Lease 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.