Correlation Between Visa and Greatek Electronics

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

Diversification Opportunities for Visa and Greatek Electronics

-0.52

Correlation Coefficient

Visa  Greatek Electronics

Excellent diversification

The 3 months correlation between Visa and Greatek is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek Electronics 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 Greatek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatek Electronics has no effect on the direction of Visa i.e., Visa and Greatek Electronics go up and down completely randomly.

Pair Corralation between Visa and Greatek Electronics

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.82 times more return on investment than Greatek Electronics. However, Visa Class A is 1.22 times less risky than Greatek Electronics. It trades about 0.08 of its potential returns per unit of risk. Greatek Electronics is currently generating about -0.02 per unit of risk. If you would invest  25,641  in Visa Class A on September 13, 2024 and sell it today you would earn a total of  5,738  from holding Visa Class A or generate 22.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.98%
Values	Daily Returns

Visa Class A  vs.  Greatek Electronics

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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 January 2025.

Greatek Electronics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Greatek Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Greatek Electronics 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 Greatek Electronics

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

The idea behind Visa Class A and Greatek Electronics 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.