Correlation Between Visteon Corp and EMCOR

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

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

Diversification Opportunities for Visteon Corp and EMCOR

0.17

Correlation Coefficient

Visteon Corp  EMCOR

Average diversification

The 3 months correlation between Visteon and EMCOR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Visteon Corp 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 Visteon Corp are associated (or correlated) with EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Visteon Corp i.e., Visteon Corp and EMCOR go up and down completely randomly.

Pair Corralation between Visteon Corp and EMCOR

Allowing for the 90-day total investment horizon Visteon Corp is expected to generate 0.52 times more return on investment than EMCOR. However, Visteon Corp is 1.92 times less risky than EMCOR. It trades about -0.06 of its potential returns per unit of risk. EMCOR Group is currently generating about -0.06 per unit of risk. If you would invest  8,650  in Visteon Corp on December 18, 2024 and sell it today you would lose (631.00) from holding Visteon Corp or give up 7.29% of portfolio value over 90 days.

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

Visteon Corp  vs.  EMCOR Group

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 latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

EMCOR Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days EMCOR Group 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 primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Visteon Corp and EMCOR

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

The idea behind Visteon Corp and EMCOR Group 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.