Correlation Between Visteon Corp and Nio

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

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

Diversification Opportunities for Visteon Corp and Nio

-0.54

Correlation Coefficient

Visteon Corp  Nio

Excellent diversification

The 3 months correlation between Visteon and Nio is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Visteon Corp i.e., Visteon Corp and Nio go up and down completely randomly.

Pair Corralation between Visteon Corp and Nio

Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the Nio. But the stock apears to be less risky and, when comparing its historical volatility, Visteon Corp is 3.09 times less risky than Nio. The stock trades about -0.05 of its potential returns per unit of risk. The Nio Class A is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  502.00  in Nio Class A on July 20, 2024 and sell it today you would earn a total of  13.00  from holding Nio Class A or generate 2.59% return on investment over 90 days.

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

Visteon Corp  vs.  Nio Class A

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 inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nio Class A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Nio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visteon Corp and Nio

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

The idea behind Visteon Corp and Nio Class A 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.