Correlation Between Adient PLC and Visteon Corp

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

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

Diversification Opportunities for Adient PLC and Visteon Corp

0.86

Correlation Coefficient

Adient PLC  Visteon Corp

Very poor diversification

The 3 months correlation between Adient and Visteon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and Adient PLC 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 Adient PLC are associated (or correlated) with Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of Adient PLC i.e., Adient PLC and Visteon Corp go up and down completely randomly.

Pair Corralation between Adient PLC and Visteon Corp

Given the investment horizon of 90 days Adient PLC is expected to under-perform the Visteon Corp. In addition to that, Adient PLC is 1.55 times more volatile than Visteon Corp. It trades about -0.01 of its total potential returns per unit of risk. Visteon Corp is currently generating about 0.04 per unit of volatility. If you would invest  8,321  in Visteon Corp on February 14, 2025 and sell it today you would earn a total of  394.00  from holding Visteon Corp or generate 4.74% return on investment over 90 days.

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

Adient PLC  vs.  Visteon Corp

Adient PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adient PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Visteon Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Visteon Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Visteon Corp may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Adient PLC and Visteon Corp

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

The idea behind Adient PLC and Visteon Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.