Correlation Between Visa and Advantech

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

Diversification Opportunities for Visa and Advantech

0.89

Correlation Coefficient

Visa  Advantech

Very poor diversification

The 3 months correlation between Visa and Advantech is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech 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 Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of Visa i.e., Visa and Advantech go up and down completely randomly.

Pair Corralation between Visa and Advantech

Taking into account the 90-day investment horizon Visa is expected to generate 1.57 times less return on investment than Advantech. But when comparing it to its historical volatility, Visa Class A is 1.93 times less risky than Advantech. It trades about 0.13 of its potential returns per unit of risk. Advantech Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  34,550  in Advantech Co on December 28, 2024 and sell it today you would earn a total of  4,250  from holding Advantech Co or generate 12.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	91.8%
Values	Daily Returns

Visa Class A  vs.  Advantech Co

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 April 2025.

Advantech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Advantech

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

The idea behind Visa Class A and Advantech Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.