Correlation Between Magna International and Visteon Corp

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

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

Diversification Opportunities for Magna International and Visteon Corp

0.3

Correlation Coefficient

Magna International  Visteon Corp

Weak diversification

The 3 months correlation between Magna and Visteon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and Magna International 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 Magna International 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 Magna International i.e., Magna International and Visteon Corp go up and down completely randomly.

Pair Corralation between Magna International and Visteon Corp

Considering the 90-day investment horizon Magna International is expected to generate 2.12 times less return on investment than Visteon Corp. But when comparing it to its historical volatility, Magna International is 1.09 times less risky than Visteon Corp. It trades about 0.01 of its potential returns per unit of risk. Visteon Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,002  in Visteon Corp on September 17, 2024 and sell it today you would earn a total of  44.00  from holding Visteon Corp or generate 0.49% return on investment over 90 days.

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

Magna International  vs.  Visteon Corp

Magna International

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Visteon Corp

Risk-Adjusted Performance

0 of 100

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 Magna International and Visteon Corp

The main advantage of trading using opposite Magna International and Visteon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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 Magna International 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.