Correlation Between Visa and Wan Hai

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

Diversification Opportunities for Visa and Wan Hai

-0.25

Correlation Coefficient

Visa  Wan Hai

Very good diversification

The 3 months correlation between Visa and Wan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines 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 Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of Visa i.e., Visa and Wan Hai go up and down completely randomly.

Pair Corralation between Visa and Wan Hai

Taking into account the 90-day investment horizon Visa is expected to generate 3.29 times less return on investment than Wan Hai. But when comparing it to its historical volatility, Visa Class A is 3.08 times less risky than Wan Hai. It trades about 0.07 of its potential returns per unit of risk. Wan Hai Lines is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,090  in Wan Hai Lines on October 7, 2024 and sell it today you would earn a total of  3,380  from holding Wan Hai Lines or generate 66.4% return on investment over 90 days.

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

Visa Class A  vs.  Wan Hai Lines

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

Wan Hai Lines

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Visa Class A and Wan Hai Lines 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.