Correlation Between Visa and XinJiang GuoTong

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

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

Diversification Opportunities for Visa and XinJiang GuoTong

0.03

Correlation Coefficient

Visa  XinJiang GuoTong

Significant diversification

The 3 months correlation between Visa and XinJiang is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and XinJiang GuoTong Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XinJiang GuoTong Pipeline 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 Class A are associated (or correlated) with XinJiang GuoTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XinJiang GuoTong Pipeline has no effect on the direction of Visa i.e., Visa and XinJiang GuoTong go up and down completely randomly.

Pair Corralation between Visa and XinJiang GuoTong

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.32 times more return on investment than XinJiang GuoTong. However, Visa Class A is 3.08 times less risky than XinJiang GuoTong. It trades about 0.11 of its potential returns per unit of risk. XinJiang GuoTong Pipeline is currently generating about 0.0 per unit of risk. If you would invest  21,122  in Visa Class A on December 2, 2024 and sell it today you would earn a total of  15,149  from holding Visa Class A or generate 71.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.36%
Values	Daily Returns

Visa Class A  vs.  XinJiang GuoTong Pipeline

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

XinJiang GuoTong Pipeline

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XinJiang GuoTong Pipeline are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, XinJiang GuoTong 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 XinJiang GuoTong

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

The idea behind Visa Class A and XinJiang GuoTong Pipeline 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.