Correlation Between Cooper Tire and Goodyear Tire

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

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

Diversification Opportunities for Cooper Tire and Goodyear Tire

0.0

Correlation Coefficient

Cooper Tire  Goodyear Tire

Pay attention - limited upside

The 3 months correlation between Cooper and Goodyear is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cooper Tire Rubber 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 Cooper 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 Cooper Tire Rubber 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 Cooper Tire i.e., Cooper Tire and Goodyear Tire go up and down completely randomly.

Pair Corralation between Cooper Tire and Goodyear Tire

If you would invest (100.00) in Cooper Tire Rubber on January 26, 2024 and sell it today you would earn a total of  100.00  from holding Cooper Tire Rubber or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cooper Tire Rubber  vs.  Goodyear Tire Rubber

Cooper Tire Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cooper Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cooper Tire is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cooper Tire and Goodyear Tire

The main advantage of trading using opposite Cooper Tire and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cooper Tire 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 Cooper Tire Rubber 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.