Correlation Between Visa and HMCIB SPAC

Can any of the company-specific risk be diversified away by investing in both Visa and HMCIB SPAC 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 HMCIB SPAC 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 HMCIB SPAC 3, you can compare the effects of market volatilities on Visa and HMCIB SPAC 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 HMCIB SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and HMCIB SPAC.

Diversification Opportunities for Visa and HMCIB SPAC

-0.8

Correlation Coefficient

Visa  HMCIB SPAC

Pay attention - limited upside

The 3 months correlation between Visa and HMCIB is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and HMCIB SPAC 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMCIB SPAC 3 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 HMCIB SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMCIB SPAC 3 has no effect on the direction of Visa i.e., Visa and HMCIB SPAC go up and down completely randomly.

Pair Corralation between Visa and HMCIB SPAC

Taking into account the 90-day investment horizon Visa is expected to generate 4.22 times less return on investment than HMCIB SPAC. But when comparing it to its historical volatility, Visa Class A is 3.79 times less risky than HMCIB SPAC. It trades about 0.09 of its potential returns per unit of risk. HMCIB SPAC 3 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  132,700  in HMCIB SPAC 3 on October 22, 2024 and sell it today you would earn a total of  13,100  from holding HMCIB SPAC 3 or generate 9.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	82.5%
Values	Daily Returns

Visa Class A  vs.  HMCIB SPAC 3

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HMCIB SPAC 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMCIB SPAC 3 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Visa and HMCIB SPAC

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

The idea behind Visa Class A and HMCIB SPAC 3 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.