Correlation Between ECD Automotive and Visteon Corp

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

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

Diversification Opportunities for ECD Automotive and Visteon Corp

-0.65

Correlation Coefficient

ECD Automotive  Visteon Corp

Excellent diversification

The 3 months correlation between ECD and Visteon is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and Visteon Corp go up and down completely randomly.

Pair Corralation between ECD Automotive and Visteon Corp

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the Visteon Corp. In addition to that, ECD Automotive is 4.0 times more volatile than Visteon Corp. It trades about -0.04 of its total potential returns per unit of risk. Visteon Corp is currently generating about 0.27 per unit of volatility. If you would invest  7,939  in Visteon Corp on May 1, 2025 and sell it today you would earn a total of  3,232  from holding Visteon Corp or generate 40.71% return on investment over 90 days.

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

ECD Automotive Design  vs.  Visteon Corp

ECD Automotive Design

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Visteon Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visteon Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Visteon Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECD Automotive and Visteon Corp

The main advantage of trading using opposite ECD Automotive and Visteon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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 ECD Automotive Design 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.