Correlation Between Visteon Corp and VHAI

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

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

Diversification Opportunities for Visteon Corp and VHAI

0.11

Correlation Coefficient

Visteon Corp  VHAI

Average diversification

The 3 months correlation between Visteon and VHAI is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and VHAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VHAI 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 VHAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VHAI has no effect on the direction of Visteon Corp i.e., Visteon Corp and VHAI go up and down completely randomly.

Pair Corralation between Visteon Corp and VHAI

Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the VHAI. But the stock apears to be less risky and, when comparing its historical volatility, Visteon Corp is 5.98 times less risky than VHAI. The stock trades about -0.04 of its potential returns per unit of risk. The VHAI is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.50  in VHAI on October 10, 2024 and sell it today you would earn a total of  0.07  from holding VHAI or generate 14.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	59.02%
Values	Daily Returns

Visteon Corp  vs.  VHAI

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

VHAI

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly uncertain basic indicators, VHAI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visteon Corp and VHAI

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

The idea behind Visteon Corp and VHAI 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.