Correlation Between China Aircraft and Visteon Corp

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

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

Diversification Opportunities for China Aircraft and Visteon Corp

0.25

Correlation Coefficient

China Aircraft  Visteon Corp

Modest diversification

The 3 months correlation between China and Visteon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and China Aircraft 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 China Aircraft Leasing 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 China Aircraft i.e., China Aircraft and Visteon Corp go up and down completely randomly.

Pair Corralation between China Aircraft and Visteon Corp

Assuming the 90 days horizon China Aircraft Leasing is expected to under-perform the Visteon Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Aircraft Leasing is 2.21 times less risky than Visteon Corp. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Visteon Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,358  in Visteon Corp on October 1, 2024 and sell it today you would lose (425.00) from holding Visteon Corp or give up 4.54% of portfolio value over 90 days.

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

China Aircraft Leasing  vs.  Visteon Corp

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with China Aircraft and Visteon Corp

The main advantage of trading using opposite China Aircraft and Visteon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft 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 China Aircraft Leasing 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.