Correlation Between Visteon Corp and GM

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

By analyzing existing cross correlation between Visteon Corp and General Motors, you can compare the effects of market volatilities on Visteon Corp and GM 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 GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visteon Corp and GM.

Diversification Opportunities for Visteon Corp and GM

0.3

Correlation Coefficient

Visteon Corp  GM

Weak diversification

The 3 months correlation between Visteon and GM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Visteon Corp i.e., Visteon Corp and GM go up and down completely randomly.

Pair Corralation between Visteon Corp and GM

Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the GM. But the stock apears to be less risky and, when comparing its historical volatility, Visteon Corp is 1.4 times less risky than GM. The stock trades about -0.06 of its potential returns per unit of risk. The General Motors is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,404  in General Motors on December 26, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

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

Visteon Corp  vs.  General Motors

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.

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visteon Corp and GM

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

The idea behind Visteon Corp and General Motors 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.