Correlation Between Visa and XiAn Dagang

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

Diversification Opportunities for Visa and XiAn Dagang

-0.65

Correlation Coefficient

Visa  XiAn Dagang

Excellent diversification

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

Pair Corralation between Visa and XiAn Dagang

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.28 times more return on investment than XiAn Dagang. However, Visa Class A is 3.51 times less risky than XiAn Dagang. It trades about 0.19 of its potential returns per unit of risk. XiAn Dagang Road is currently generating about -0.12 per unit of risk. If you would invest  28,322  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  3,640  from holding Visa Class A or generate 12.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Visa Class A  vs.  XiAn Dagang Road

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

XiAn Dagang Road

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XiAn Dagang Road has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Visa and XiAn Dagang

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

The idea behind Visa Class A and XiAn Dagang Road 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..