Correlation Between Transportadora and GOODYEAR T

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

By analyzing existing cross correlation between Transportadora de Gas and GOODYEAR T RUBBER, you can compare the effects of market volatilities on Transportadora and GOODYEAR T 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 Transportadora with a short position of GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and GOODYEAR T.

Diversification Opportunities for Transportadora and GOODYEAR T

0.81

Correlation Coefficient

Transportadora  GOODYEAR T

Very poor diversification

The 3 months correlation between Transportadora and GOODYEAR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER and Transportadora 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 Transportadora de Gas are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of Transportadora i.e., Transportadora and GOODYEAR T go up and down completely randomly.

Pair Corralation between Transportadora and GOODYEAR T

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 1.42 times more return on investment than GOODYEAR T. However, Transportadora is 1.42 times more volatile than GOODYEAR T RUBBER. It trades about 0.07 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about 0.0 per unit of risk. If you would invest  1,030  in Transportadora de Gas on October 3, 2024 and sell it today you would earn a total of  1,670  from holding Transportadora de Gas or generate 162.14% return on investment over 90 days.

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

Transportadora de Gas  vs.  GOODYEAR T RUBBER

Transportadora de Gas

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

GOODYEAR T RUBBER

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and GOODYEAR T

The main advantage of trading using opposite Transportadora and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora position performs unexpectedly, GOODYEAR T 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 T will offset losses from the drop in GOODYEAR T's long position.

The idea behind Transportadora de Gas and GOODYEAR T 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.