Correlation Between Visa and Fuh Hwa

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

Diversification Opportunities for Visa and Fuh Hwa

-0.88

Correlation Coefficient

Visa  Fuh Hwa

Pay attention - limited upside

The 3 months correlation between Visa and Fuh is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Fuh Hwa FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa FTSE 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 Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa FTSE has no effect on the direction of Visa i.e., Visa and Fuh Hwa go up and down completely randomly.

Pair Corralation between Visa and Fuh Hwa

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.09 times more return on investment than Fuh Hwa. However, Visa is 1.09 times more volatile than Fuh Hwa FTSE. It trades about 0.08 of its potential returns per unit of risk. Fuh Hwa FTSE is currently generating about 0.06 per unit of risk. If you would invest  21,523  in Visa Class A on September 29, 2024 and sell it today you would earn a total of  10,343  from holding Visa Class A or generate 48.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.98%
Values	Daily Returns

Visa Class A  vs.  Fuh Hwa FTSE

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

Fuh Hwa FTSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuh Hwa FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Visa and Fuh Hwa

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

The idea behind Visa Class A and Fuh Hwa FTSE 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.