Correlation Between Visteon Corp and EBay

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

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

Diversification Opportunities for Visteon Corp and EBay

-0.56

Correlation Coefficient

Visteon Corp  EBay

Excellent diversification

The 3 months correlation between Visteon and EBay is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Visteon Corp i.e., Visteon Corp and EBay go up and down completely randomly.

Pair Corralation between Visteon Corp and EBay

Allowing for the 90-day total investment horizon Visteon Corp is expected to generate 1.25 times more return on investment than EBay. However, Visteon Corp is 1.25 times more volatile than eBay Inc. It trades about 0.13 of its potential returns per unit of risk. eBay Inc is currently generating about -0.17 per unit of risk. If you would invest  10,991  in Visteon Corp on February 5, 2024 and sell it today you would earn a total of  481.00  from holding Visteon Corp or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visteon Corp  vs.  eBay Inc

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.

eBay Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visteon Corp and EBay

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

The idea behind Visteon Corp and eBay 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.