Correlation Between THAI BEVERAGE and Goodyear Tire

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

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

Diversification Opportunities for THAI BEVERAGE and Goodyear Tire

0.53

Correlation Coefficient

THAI BEVERAGE  Goodyear Tire

Very weak diversification

The 3 months correlation between THAI and Goodyear is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE 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 THAI BEVERAGE 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 THAI BEVERAGE 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 THAI BEVERAGE i.e., THAI BEVERAGE and Goodyear Tire go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and Goodyear Tire

Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 0.63 times more return on investment than Goodyear Tire. However, THAI BEVERAGE is 1.59 times less risky than Goodyear Tire. It trades about -0.19 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about -0.25 per unit of risk. If you would invest  38.00  in THAI BEVERAGE on October 13, 2024 and sell it today you would lose (2.00) from holding THAI BEVERAGE or give up 5.26% of portfolio value over 90 days.

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

THAI BEVERAGE  vs.  Goodyear Tire Rubber

THAI BEVERAGE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THAI BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, THAI BEVERAGE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Goodyear Tire Rubber

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with THAI BEVERAGE and Goodyear Tire

The main advantage of trading using opposite THAI BEVERAGE and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THAI BEVERAGE 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 THAI BEVERAGE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.