Correlation Between Visteon Corp and Titan Machinery

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

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

Diversification Opportunities for Visteon Corp and Titan Machinery

0.02

Correlation Coefficient

Visteon Corp  Titan Machinery

Significant diversification

The 3 months correlation between Visteon and Titan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Visteon Corp i.e., Visteon Corp and Titan Machinery go up and down completely randomly.

Pair Corralation between Visteon Corp and Titan Machinery

Allowing for the 90-day total investment horizon Visteon Corp is expected to generate 0.68 times more return on investment than Titan Machinery. However, Visteon Corp is 1.48 times less risky than Titan Machinery. It trades about -0.02 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.05 per unit of risk. If you would invest  12,975  in Visteon Corp on September 10, 2024 and sell it today you would lose (3,654) from holding Visteon Corp or give up 28.16% of portfolio value over 90 days.

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

Visteon Corp  vs.  Titan Machinery

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.

Titan Machinery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Titan Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visteon Corp and Titan Machinery

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

The idea behind Visteon Corp and Titan Machinery 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..