Correlation Between Kingdee International and Goodyear Tire

Can any of the company-specific risk be diversified away by investing in both Kingdee International and Goodyear Tire 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 Kingdee International and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingdee International Software and Goodyear Tire Rubber, you can compare the effects of market volatilities on Kingdee International and Goodyear Tire 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 Kingdee International with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and Goodyear Tire.

Diversification Opportunities for Kingdee International and Goodyear Tire

0.16

Correlation Coefficient

Kingdee International  Goodyear Tire

Average diversification

The 3 months correlation between Kingdee and Goodyear is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber and Kingdee International 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 Kingdee International Software are associated (or correlated) with Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of Kingdee International i.e., Kingdee International and Goodyear Tire go up and down completely randomly.

Pair Corralation between Kingdee International and Goodyear Tire

Assuming the 90 days trading horizon Kingdee International Software is expected to under-perform the Goodyear Tire. In addition to that, Kingdee International is 1.37 times more volatile than Goodyear Tire Rubber. It trades about -0.02 of its total potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.0 per unit of volatility. If you would invest  1,042  in Goodyear Tire Rubber on October 11, 2024 and sell it today you would lose (191.00) from holding Goodyear Tire Rubber or give up 18.33% of portfolio value over 90 days.

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

Kingdee International Software  vs.  Goodyear Tire Rubber

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with Kingdee International and Goodyear Tire

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

The idea behind Kingdee International Software and Goodyear Tire Rubber 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..