Correlation Between Visa and Renrenle Commercial

Can any of the company-specific risk be diversified away by investing in both Visa and Renrenle Commercial 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 Renrenle Commercial 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 Renrenle Commercial Group, you can compare the effects of market volatilities on Visa and Renrenle Commercial 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 Renrenle Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Renrenle Commercial.

Diversification Opportunities for Visa and Renrenle Commercial

0.89

Correlation Coefficient

Visa  Renrenle Commercial

Very poor diversification

The 3 months correlation between Visa and Renrenle is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Renrenle Commercial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renrenle Commercial 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 Renrenle Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renrenle Commercial has no effect on the direction of Visa i.e., Visa and Renrenle Commercial go up and down completely randomly.

Pair Corralation between Visa and Renrenle Commercial

Taking into account the 90-day investment horizon Visa is expected to generate 12.2 times less return on investment than Renrenle Commercial. But when comparing it to its historical volatility, Visa Class A is 4.38 times less risky than Renrenle Commercial. It trades about 0.07 of its potential returns per unit of risk. Renrenle Commercial Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  514.00  in Renrenle Commercial Group on October 7, 2024 and sell it today you would earn a total of  85.00  from holding Renrenle Commercial Group or generate 16.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Renrenle Commercial Group

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

Renrenle Commercial

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Renrenle Commercial Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renrenle Commercial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Renrenle Commercial

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

The idea behind Visa Class A and Renrenle Commercial Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.