Correlation Between Focus Home and Visa

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

By analyzing existing cross correlation between Focus Home Interactive and Visa Inc, you can compare the effects of market volatilities on Focus Home and Visa 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 Focus Home with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Home and Visa.

Diversification Opportunities for Focus Home and Visa

-0.01

Correlation Coefficient

Focus Home  Visa

Good diversification

The 3 months correlation between Focus and Visa is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and Focus Home 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 Focus Home Interactive are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Focus Home i.e., Focus Home and Visa go up and down completely randomly.

Pair Corralation between Focus Home and Visa

Assuming the 90 days horizon Focus Home Interactive is not expected to generate positive returns. Moreover, Focus Home is 3.18 times more volatile than Visa Inc. It trades away all of its potential returns to assume current level of volatility. Visa Inc is currently generating about 0.28 per unit of risk. If you would invest  26,161  in Visa Inc on October 26, 2024 and sell it today you would earn a total of  5,144  from holding Visa Inc or generate 19.66% return on investment over 90 days.

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

Focus Home Interactive  vs.  Visa Inc

Focus Home Interactive

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Focus Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Visa Inc

Risk-Adjusted Performance

21 of 100

Solid

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

Pair Trading with Focus Home and Visa

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

The idea behind Focus Home Interactive and Visa Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.