Correlation Between AETNA and Visteon Corp

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

By analyzing existing cross correlation between AETNA INC 7625 and Visteon Corp, you can compare the effects of market volatilities on AETNA 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 AETNA with a short position of Visteon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AETNA and Visteon Corp.

Diversification Opportunities for AETNA and Visteon Corp

-0.06

Correlation Coefficient

AETNA  Visteon Corp

Good diversification

The 3 months correlation between AETNA and Visteon is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding AETNA INC 7625 and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and AETNA 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 AETNA INC 7625 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 AETNA i.e., AETNA and Visteon Corp go up and down completely randomly.

Pair Corralation between AETNA and Visteon Corp

Assuming the 90 days trading horizon AETNA INC 7625 is expected to under-perform the Visteon Corp. But the bond apears to be less risky and, when comparing its historical volatility, AETNA INC 7625 is 1.53 times less risky than Visteon Corp. The bond trades about -0.02 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  9,052  in Visteon Corp on September 13, 2024 and sell it today you would earn a total of  283.00  from holding Visteon Corp or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.84%
Values	Daily Returns

AETNA INC 7625  vs.  Visteon Corp

AETNA INC 7625

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AETNA INC 7625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AETNA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Visteon Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Visteon Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 AETNA and Visteon Corp

The main advantage of trading using opposite AETNA and Visteon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AETNA 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 AETNA INC 7625 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.