Correlation Between Ford and Visteon Corp

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

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

Diversification Opportunities for Ford and Visteon Corp

0.61

Correlation Coefficient

Ford  Visteon Corp

Poor diversification

The 3 months correlation between Ford and Visteon is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and Ford 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 Ford Motor are associated (or correlated) with Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of Ford i.e., Ford and Visteon Corp go up and down completely randomly.

Pair Corralation between Ford and Visteon Corp

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Visteon Corp. In addition to that, Ford is 1.06 times more volatile than Visteon Corp. It trades about -0.11 of its total potential returns per unit of risk. Visteon Corp is currently generating about -0.05 per unit of volatility. If you would invest  9,337  in Visteon Corp on November 28, 2024 and sell it today you would lose (533.50) from holding Visteon Corp or give up 5.71% of portfolio value over 90 days.

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

Ford Motor  vs.  Visteon Corp

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Visteon Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ford and Visteon Corp

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

The idea behind Ford Motor and Visteon Corp 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.