Correlation Between Goodyear Tire and Meta Financial

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

Diversification Opportunities for Goodyear Tire and Meta Financial

0.88

Correlation Coefficient

Goodyear Tire  Meta Financial

Very poor diversification

The 3 months correlation between Goodyear and Meta is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Meta Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Financial Group 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 Meta Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Financial Group has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Meta Financial go up and down completely randomly.

Pair Corralation between Goodyear Tire and Meta Financial

Assuming the 90 days trading horizon Goodyear Tire is expected to generate 2.54 times less return on investment than Meta Financial. In addition to that, Goodyear Tire is 1.09 times more volatile than Meta Financial Group. It trades about 0.03 of its total potential returns per unit of risk. Meta Financial Group is currently generating about 0.09 per unit of volatility. If you would invest  6,496  in Meta Financial Group on October 6, 2024 and sell it today you would earn a total of  554.00  from holding Meta Financial Group or generate 8.53% return on investment over 90 days.

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

Goodyear Tire Rubber  vs.  Meta Financial Group

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.

Meta Financial Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meta Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodyear Tire and Meta Financial

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

The idea behind Goodyear Tire Rubber and Meta Financial Group 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 Anywhere module to track or share privately all of your investments from the convenience of any device.