Correlation Between Micron Technology and Goodyear Tire

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

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

Diversification Opportunities for Micron Technology and Goodyear Tire

-0.02

Correlation Coefficient

Micron Technology  Goodyear Tire

Good diversification

The 3 months correlation between Micron and Goodyear is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire and Micron Technology 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 Micron Technology 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 has no effect on the direction of Micron Technology i.e., Micron Technology and Goodyear Tire go up and down completely randomly.

Pair Corralation between Micron Technology and Goodyear Tire

Assuming the 90 days horizon Micron Technology is expected to generate 1.93 times more return on investment than Goodyear Tire. However, Micron Technology is 1.93 times more volatile than The Goodyear Tire. It trades about 0.02 of its potential returns per unit of risk. The Goodyear Tire is currently generating about -0.1 per unit of risk. If you would invest  212,913  in Micron Technology on October 26, 2024 and sell it today you would earn a total of  187.00  from holding Micron Technology or generate 0.09% return on investment over 90 days.

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

Micron Technology  vs.  The Goodyear Tire

Micron Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Micron Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goodyear Tire

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Goodyear Tire are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Micron Technology and Goodyear Tire

The main advantage of trading using opposite Micron Technology and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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 Micron Technology and The Goodyear Tire 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.