Correlation Between Visteon Corp and PACCAR

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

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

Diversification Opportunities for Visteon Corp and PACCAR

0.39

Correlation Coefficient

Visteon Corp  PACCAR

Weak diversification

The 3 months correlation between Visteon and PACCAR is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Visteon Corp i.e., Visteon Corp and PACCAR go up and down completely randomly.

Pair Corralation between Visteon Corp and PACCAR

Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the PACCAR. In addition to that, Visteon Corp is 1.06 times more volatile than PACCAR Inc. It trades about -0.04 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.04 per unit of volatility. If you would invest  10,424  in PACCAR Inc on December 27, 2024 and sell it today you would lose (471.00) from holding PACCAR Inc or give up 4.52% 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.  PACCAR Inc

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.

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Visteon Corp and PACCAR

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

The idea behind Visteon Corp and PACCAR Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..