Correlation Between Bridgestone and Innoviz Technologies

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

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

Diversification Opportunities for Bridgestone and Innoviz Technologies

0.24

Correlation Coefficient

Bridgestone  Innoviz Technologies

Modest diversification

The 3 months correlation between Bridgestone and Innoviz is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone and Innoviz Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innoviz Technologies and Bridgestone 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 Bridgestone are associated (or correlated) with Innoviz Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innoviz Technologies has no effect on the direction of Bridgestone i.e., Bridgestone and Innoviz Technologies go up and down completely randomly.

Pair Corralation between Bridgestone and Innoviz Technologies

Assuming the 90 days horizon Bridgestone is expected to generate 0.32 times more return on investment than Innoviz Technologies. However, Bridgestone is 3.15 times less risky than Innoviz Technologies. It trades about 0.02 of its potential returns per unit of risk. Innoviz Technologies is currently generating about -0.06 per unit of risk. If you would invest  4,367  in Bridgestone on February 4, 2024 and sell it today you would earn a total of  48.00  from holding Bridgestone or generate 1.1% return on investment over 90 days.

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

Bridgestone  vs.  Innoviz Technologies

Bridgestone

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgestone are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Bridgestone is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Innoviz Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innoviz Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bridgestone and Innoviz Technologies

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

The idea behind Bridgestone and Innoviz Technologies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .