Correlation Between Visteon Corp and Rave Restaurant

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

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

Diversification Opportunities for Visteon Corp and Rave Restaurant

0.72

Correlation Coefficient

Visteon Corp  Rave Restaurant

Poor diversification

The 3 months correlation between Visteon and Rave is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Visteon Corp i.e., Visteon Corp and Rave Restaurant go up and down completely randomly.

Pair Corralation between Visteon Corp and Rave Restaurant

Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the Rave Restaurant. But the stock apears to be less risky and, when comparing its historical volatility, Visteon Corp is 1.45 times less risky than Rave Restaurant. The stock trades about -0.1 of its potential returns per unit of risk. The Rave Restaurant Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  264.00  in Rave Restaurant Group on October 26, 2024 and sell it today you would lose (5.00) from holding Rave Restaurant Group or give up 1.89% of portfolio value over 90 days.

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

Visteon Corp  vs.  Rave Restaurant Group

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 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.

Rave Restaurant Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rave Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rave Restaurant is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visteon Corp and Rave Restaurant

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

The idea behind Visteon Corp and Rave Restaurant 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.