Correlation Between Goodyear Tire and ATT

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

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

Diversification Opportunities for Goodyear Tire and ATT

0.59

Correlation Coefficient

Goodyear Tire  ATT

Very weak diversification

The 3 months correlation between Goodyear and ATT is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Goodyear Tire 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 Goodyear Tire Rubber are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and ATT go up and down completely randomly.

Pair Corralation between Goodyear Tire and ATT

Allowing for the 90-day total investment horizon Goodyear Tire Rubber is expected to under-perform the ATT. In addition to that, Goodyear Tire is 1.92 times more volatile than ATT Inc. It trades about -0.13 of its total potential returns per unit of risk. ATT Inc is currently generating about -0.11 per unit of volatility. If you would invest  1,729  in ATT Inc on February 4, 2024 and sell it today you would lose (44.00) from holding ATT Inc or give up 2.54% of portfolio value over 90 days.

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

Goodyear Tire Rubber  vs.  ATT Inc

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. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ATT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Goodyear Tire and ATT

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

The idea behind Goodyear Tire Rubber and ATT Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.