Correlation Between Goodyear Tire and BlueScope Steel

Can any of the company-specific risk be diversified away by investing in both Goodyear Tire and BlueScope Steel 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 BlueScope Steel 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 BlueScope Steel Limited, you can compare the effects of market volatilities on Goodyear Tire and BlueScope Steel 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 BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and BlueScope Steel.

Diversification Opportunities for Goodyear Tire and BlueScope Steel

0.47

Correlation Coefficient

Goodyear Tire  BlueScope Steel

Very weak diversification

The 3 months correlation between Goodyear and BlueScope is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Goodyear Tire i.e., Goodyear Tire and BlueScope Steel go up and down completely randomly.

Pair Corralation between Goodyear Tire and BlueScope Steel

Assuming the 90 days trading horizon Goodyear Tire is expected to generate 1.84 times less return on investment than BlueScope Steel. In addition to that, Goodyear Tire is 1.72 times more volatile than BlueScope Steel Limited. It trades about 0.04 of its total potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.11 per unit of volatility. If you would invest  1,240  in BlueScope Steel Limited on April 24, 2025 and sell it today you would earn a total of  150.00  from holding BlueScope Steel Limited or generate 12.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Goodyear Tire Rubber  vs.  BlueScope Steel Limited

Goodyear Tire Rubber

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in August 2025.

BlueScope Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BlueScope Steel may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Goodyear Tire and BlueScope Steel

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

The idea behind Goodyear Tire Rubber and BlueScope Steel Limited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.