Correlation Between Pan Asia and Goodyear Public

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

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

Diversification Opportunities for Pan Asia and Goodyear Public

-0.57

Correlation Coefficient

Pan Asia  Goodyear Public

Excellent diversification

The 3 months correlation between Pan and Goodyear is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Footwear and Goodyear Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Public and Pan Asia 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 Pan Asia Footwear are associated (or correlated) with Goodyear Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Public has no effect on the direction of Pan Asia i.e., Pan Asia and Goodyear Public go up and down completely randomly.

Pair Corralation between Pan Asia and Goodyear Public

Assuming the 90 days trading horizon Pan Asia Footwear is expected to under-perform the Goodyear Public. In addition to that, Pan Asia is 1.64 times more volatile than Goodyear Public. It trades about -0.04 of its total potential returns per unit of risk. Goodyear Public is currently generating about 0.16 per unit of volatility. If you would invest  15,300  in Goodyear Public on October 21, 2024 and sell it today you would earn a total of  2,100  from holding Goodyear Public or generate 13.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Pan Asia Footwear  vs.  Goodyear Public

Pan Asia Footwear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan Asia Footwear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Goodyear Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Goodyear Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Asia and Goodyear Public

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

The idea behind Pan Asia Footwear and Goodyear Public 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.