Correlation Between Visa and FibroGen

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

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

Diversification Opportunities for Visa and FibroGen

0.07

Correlation Coefficient

Visa  FibroGen

Significant diversification

The 3 months correlation between Visa and FibroGen is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen and Visa 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 Visa Inc are associated (or correlated) with FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Visa i.e., Visa and FibroGen go up and down completely randomly.

Pair Corralation between Visa and FibroGen

Given the investment horizon of 90 days Visa Inc is expected to generate 0.15 times more return on investment than FibroGen. However, Visa Inc is 6.48 times less risky than FibroGen. It trades about 0.08 of its potential returns per unit of risk. FibroGen is currently generating about -0.02 per unit of risk. If you would invest  398,437  in Visa Inc on September 23, 2024 and sell it today you would earn a total of  240,063  from holding Visa Inc or generate 60.25% return on investment over 90 days.

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

Visa Inc  vs.  FibroGen

Visa Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

FibroGen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FibroGen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, FibroGen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and FibroGen

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

The idea behind Visa Inc and FibroGen 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.