Correlation Between Goodyear Tire and Boeing

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

Diversification Opportunities for Goodyear Tire and Boeing

0.21

Correlation Coefficient

Goodyear Tire  Boeing

Modest diversification

The 3 months correlation between Goodyear and Boeing is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Boeing go up and down completely randomly.

Pair Corralation between Goodyear Tire and Boeing

Assuming the 90 days trading horizon Goodyear Tire is expected to generate 1.9 times less return on investment than Boeing. In addition to that, Goodyear Tire is 1.61 times more volatile than The Boeing. It trades about 0.06 of its total potential returns per unit of risk. The Boeing is currently generating about 0.19 per unit of volatility. If you would invest  13,516  in The Boeing on October 10, 2024 and sell it today you would earn a total of  3,076  from holding The Boeing or generate 22.76% 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.  The Boeing

Goodyear Tire Rubber

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 4 (%) 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.

Boeing

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodyear Tire and Boeing

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

The idea behind Goodyear Tire Rubber and The Boeing 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.