Correlation Between Visa and Yeong Guan

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

Diversification Opportunities for Visa and Yeong Guan

0.31

Correlation Coefficient

Visa  Yeong Guan

Weak diversification

The 3 months correlation between Visa and Yeong is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Yeong Guan Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yeong Guan Energy 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 Yeong Guan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yeong Guan Energy has no effect on the direction of Visa i.e., Visa and Yeong Guan go up and down completely randomly.

Pair Corralation between Visa and Yeong Guan

Taking into account the 90-day investment horizon Visa is expected to generate 3.2 times less return on investment than Yeong Guan. But when comparing it to its historical volatility, Visa Class A is 1.54 times less risky than Yeong Guan. It trades about 0.14 of its potential returns per unit of risk. Yeong Guan Energy is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,680  in Yeong Guan Energy on December 4, 2024 and sell it today you would earn a total of  320.00  from holding Yeong Guan Energy or generate 8.7% return on investment over 90 days.

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

Visa Class A  vs.  Yeong Guan Energy

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 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.

Yeong Guan Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yeong Guan Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yeong Guan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Visa and Yeong Guan

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

The idea behind Visa Class A and Yeong Guan Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.