Correlation Between Monro Muffler and Visteon Corp

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

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

Diversification Opportunities for Monro Muffler and Visteon Corp

-0.12

Correlation Coefficient

Monro Muffler  Visteon Corp

Good diversification

The 3 months correlation between Monro and Visteon is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Monro Muffler Brake and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and Monro Muffler 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 Monro Muffler Brake 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 Monro Muffler i.e., Monro Muffler and Visteon Corp go up and down completely randomly.

Pair Corralation between Monro Muffler and Visteon Corp

Given the investment horizon of 90 days Monro Muffler Brake is expected to generate 0.96 times more return on investment than Visteon Corp. However, Monro Muffler Brake is 1.04 times less risky than Visteon Corp. It trades about 0.04 of its potential returns per unit of risk. Visteon Corp is currently generating about -0.06 per unit of risk. If you would invest  2,709  in Monro Muffler Brake on August 30, 2024 and sell it today you would earn a total of  112.00  from holding Monro Muffler Brake or generate 4.13% return on investment over 90 days.

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

Monro Muffler Brake  vs.  Visteon Corp

Monro Muffler Brake

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monro Muffler Brake are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Monro Muffler is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Monro Muffler and Visteon Corp

The main advantage of trading using opposite Monro Muffler and Visteon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monro Muffler 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 Monro Muffler Brake 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.