Correlation Between Goodyear Tire and Sekisui Chemical

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

Diversification Opportunities for Goodyear Tire and Sekisui Chemical

-0.23

Correlation Coefficient

Goodyear Tire  Sekisui Chemical

Very good diversification

The 3 months correlation between Goodyear and Sekisui is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical 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 Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and Sekisui Chemical go up and down completely randomly.

Pair Corralation between Goodyear Tire and Sekisui Chemical

Assuming the 90 days trading horizon Goodyear Tire is expected to generate 2.54 times less return on investment than Sekisui Chemical. In addition to that, Goodyear Tire is 1.52 times more volatile than Sekisui Chemical Co. It trades about 0.02 of its total potential returns per unit of risk. Sekisui Chemical Co is currently generating about 0.08 per unit of volatility. If you would invest  1,480  in Sekisui Chemical Co on December 22, 2024 and sell it today you would earn a total of  140.00  from holding Sekisui Chemical Co or generate 9.46% return on investment over 90 days.

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

Goodyear Tire Rubber  vs.  Sekisui Chemical Co

Goodyear Tire Rubber

Risk-Adjusted Performance

Very 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.

Sekisui Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sekisui Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Goodyear Tire and Sekisui Chemical

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

The idea behind Goodyear Tire Rubber and Sekisui Chemical Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.