Correlation Between Visteon Corp and Li AutoInc
Can any of the company-specific risk be diversified away by investing in both Visteon Corp and Li AutoInc 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 Li AutoInc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visteon Corp and Li AutoInc, you can compare the effects of market volatilities on Visteon Corp and Li AutoInc 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 Li AutoInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visteon Corp and Li AutoInc.
Diversification Opportunities for Visteon Corp and Li AutoInc
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visteon and Li AutoInc is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and Li AutoInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li AutoInc 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 Li AutoInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li AutoInc has no effect on the direction of Visteon Corp i.e., Visteon Corp and Li AutoInc go up and down completely randomly.
Pair Corralation between Visteon Corp and Li AutoInc
Allowing for the 90-day total investment horizon Visteon Corp is expected to generate 0.35 times more return on investment than Li AutoInc. However, Visteon Corp is 2.87 times less risky than Li AutoInc. It trades about 0.13 of its potential returns per unit of risk. Li AutoInc is currently generating about -0.04 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 Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visteon Corp vs. Li AutoInc
Performance |
Timeline |
Visteon Corp |
Li AutoInc |
Visteon Corp and Li AutoInc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visteon Corp and Li AutoInc
The main advantage of trading using opposite Visteon Corp and Li AutoInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visteon Corp position performs unexpectedly, Li AutoInc 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 Li AutoInc will offset losses from the drop in Li AutoInc's long position.The idea behind Visteon Corp and Li AutoInc 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.Li AutoInc vs. Nio Class A | Li AutoInc vs. Rivian Automotive | Li AutoInc vs. Lucid Group | Li AutoInc vs. Tesla Inc |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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