Correlation Between Visteon Corp and Liberty Media

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

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

Diversification Opportunities for Visteon Corp and Liberty Media

0.06

Correlation Coefficient

Visteon Corp  Liberty Media

Significant diversification

The 3 months correlation between Visteon and Liberty is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Visteon Corp i.e., Visteon Corp and Liberty Media go up and down completely randomly.

Pair Corralation between Visteon Corp and Liberty Media

Allowing for the 90-day total investment horizon Visteon Corp is expected to generate 13.68 times less return on investment than Liberty Media. But when comparing it to its historical volatility, Visteon Corp is 1.03 times less risky than Liberty Media. It trades about 0.03 of its potential returns per unit of risk. Liberty Media is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  4,166  in Liberty Media on September 14, 2024 and sell it today you would earn a total of  2,969  from holding Liberty Media or generate 71.27% return on investment over 90 days.

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

Visteon Corp  vs.  Liberty Media

Visteon Corp

Risk-Adjusted Performance

2 of 100

Weak

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.

Liberty Media

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Liberty Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visteon Corp and Liberty Media

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

The idea behind Visteon Corp and Liberty Media 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.