Correlation Between Neogen and Goodyear

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

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

Diversification Opportunities for Neogen and Goodyear

0.38

Correlation Coefficient

Neogen  Goodyear

Weak diversification

The 3 months correlation between Neogen and Goodyear is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Neogen 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 Neogen 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 Neogen are associated (or correlated) with Goodyear. 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 Neogen i.e., Neogen and Goodyear go up and down completely randomly.

Pair Corralation between Neogen and Goodyear

Given the investment horizon of 90 days Neogen is expected to under-perform the Goodyear. In addition to that, Neogen is 8.68 times more volatile than Goodyear Tire Rubber. It trades about -0.13 of its total potential returns per unit of risk. Goodyear Tire Rubber is currently generating about -0.04 per unit of volatility. If you would invest  9,895  in Goodyear Tire Rubber on September 14, 2024 and sell it today you would lose (85.00) from holding Goodyear Tire Rubber or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Neogen  vs.  Goodyear Tire Rubber

Neogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Goodyear Tire Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodyear Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Goodyear is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Neogen and Goodyear

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

The idea behind Neogen 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.