Correlation Between Compagnie Generale and Goodyear Tire

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

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

Diversification Opportunities for Compagnie Generale and Goodyear Tire

-0.7

Correlation Coefficient

Compagnie Generale  Goodyear Tire

Excellent diversification

The 3 months correlation between Compagnie and Goodyear is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Generale des 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 Compagnie Generale 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 Compagnie Generale des 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 Compagnie Generale i.e., Compagnie Generale and Goodyear Tire go up and down completely randomly.

Pair Corralation between Compagnie Generale and Goodyear Tire

Assuming the 90 days horizon Compagnie Generale des is expected to under-perform the Goodyear Tire. But the pink sheet apears to be less risky and, when comparing its historical volatility, Compagnie Generale des is 2.2 times less risky than Goodyear Tire. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Goodyear Tire Rubber is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  791.00  in Goodyear Tire Rubber on September 14, 2024 and sell it today you would earn a total of  216.00  from holding Goodyear Tire Rubber or generate 27.31% return on investment over 90 days.

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

Compagnie Generale des  vs.  Goodyear Tire Rubber

Compagnie Generale des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Generale des has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Goodyear Tire Rubber

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Goodyear Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Generale and Goodyear Tire

The main advantage of trading using opposite Compagnie Generale and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Generale 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 Compagnie Generale des 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.