Correlation Between Goodyear Tire and ADHI KARYA

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

Diversification Opportunities for Goodyear Tire and ADHI KARYA

0.34

Correlation Coefficient

Goodyear Tire  ADHI KARYA

Weak diversification

The 3 months correlation between Goodyear and ADHI is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and ADHI KARYA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADHI KARYA 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 ADHI KARYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADHI KARYA has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and ADHI KARYA go up and down completely randomly.

Pair Corralation between Goodyear Tire and ADHI KARYA

Assuming the 90 days trading horizon Goodyear Tire is expected to generate 23.38 times less return on investment than ADHI KARYA. But when comparing it to its historical volatility, Goodyear Tire Rubber is 5.29 times less risky than ADHI KARYA. It trades about 0.02 of its potential returns per unit of risk. ADHI KARYA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.85  in ADHI KARYA on December 30, 2024 and sell it today you would earn a total of  0.05  from holding ADHI KARYA or generate 5.88% 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.  ADHI KARYA

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.

ADHI KARYA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADHI KARYA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ADHI KARYA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodyear Tire and ADHI KARYA

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

The idea behind Goodyear Tire Rubber and ADHI KARYA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.