Correlation Between Visteon Corp and Magna International

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

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

Diversification Opportunities for Visteon Corp and Magna International

0.26

Correlation Coefficient

Visteon Corp  Magna International

Modest diversification

The 3 months correlation between Visteon and Magna is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Visteon Corp i.e., Visteon Corp and Magna International go up and down completely randomly.

Pair Corralation between Visteon Corp and Magna International

Allowing for the 90-day total investment horizon Visteon Corp is expected to generate 1.09 times more return on investment than Magna International. However, Visteon Corp is 1.09 times more volatile than Magna International. It trades about 0.02 of its potential returns per unit of risk. Magna International is currently generating about 0.01 per unit of risk. 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

Visteon Corp  vs.  Magna International

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.

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.

Pair Trading with Visteon Corp and Magna International

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

The idea behind Visteon Corp and Magna International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.