Correlation Between Visa and Hwa Fong

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

Diversification Opportunities for Visa and Hwa Fong

0.34

Correlation Coefficient

Visa  Hwa Fong

Weak diversification

The 3 months correlation between Visa and Hwa is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hwa Fong Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwa Fong Rubber 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 Hwa Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwa Fong Rubber has no effect on the direction of Visa i.e., Visa and Hwa Fong go up and down completely randomly.

Pair Corralation between Visa and Hwa Fong

Taking into account the 90-day investment horizon Visa is expected to generate 1.29 times less return on investment than Hwa Fong. In addition to that, Visa is 2.83 times more volatile than Hwa Fong Rubber. It trades about 0.1 of its total potential returns per unit of risk. Hwa Fong Rubber is currently generating about 0.36 per unit of volatility. If you would invest  1,820  in Hwa Fong Rubber on December 4, 2024 and sell it today you would earn a total of  50.00  from holding Hwa Fong Rubber or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Hwa Fong Rubber

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.

Hwa Fong Rubber

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hwa Fong Rubber are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hwa Fong 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 Hwa Fong

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

The idea behind Visa Class A and Hwa Fong Rubber 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.