Correlation Between Visa and Guangzhou KDT

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

Diversification Opportunities for Visa and Guangzhou KDT

0.06

Correlation Coefficient

Visa  Guangzhou KDT

Significant diversification

The 3 months correlation between Visa and Guangzhou is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Guangzhou KDT Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KDT Machinery 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 Guangzhou KDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KDT Machinery has no effect on the direction of Visa i.e., Visa and Guangzhou KDT go up and down completely randomly.

Pair Corralation between Visa and Guangzhou KDT

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.43 times more return on investment than Guangzhou KDT. However, Visa Class A is 2.31 times less risky than Guangzhou KDT. It trades about 0.08 of its potential returns per unit of risk. Guangzhou KDT Machinery is currently generating about 0.03 per unit of risk. If you would invest  22,590  in Visa Class A on October 27, 2024 and sell it today you would earn a total of  10,430  from holding Visa Class A or generate 46.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.57%
Values	Daily Returns

Visa Class A  vs.  Guangzhou KDT Machinery

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

Guangzhou KDT Machinery

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Visa Class A and Guangzhou KDT Machinery 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.