Correlation Between Visa and Samsung KODEX

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

Diversification Opportunities for Visa and Samsung KODEX

0.65

Correlation Coefficient

Visa  Samsung KODEX

Poor diversification

The 3 months correlation between Visa and Samsung is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Samsung KODEX IT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung KODEX IT 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 Samsung KODEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung KODEX IT has no effect on the direction of Visa i.e., Visa and Samsung KODEX go up and down completely randomly.

Pair Corralation between Visa and Samsung KODEX

Taking into account the 90-day investment horizon Visa is expected to generate 1.51 times less return on investment than Samsung KODEX. But when comparing it to its historical volatility, Visa Class A is 1.69 times less risky than Samsung KODEX. It trades about 0.12 of its potential returns per unit of risk. Samsung KODEX IT is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,464,000  in Samsung KODEX IT on December 20, 2024 and sell it today you would earn a total of  146,000  from holding Samsung KODEX IT or generate 9.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.92%
Values	Daily Returns

Visa Class A  vs.  Samsung KODEX IT

Visa Class A

Risk-Adjusted Performance

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 April 2025.

Samsung KODEX IT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung KODEX IT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung KODEX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Samsung KODEX

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

The idea behind Visa Class A and Samsung KODEX IT 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.

Check out your portfolio center.

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.