Correlation Between Visa and Shandong Rike

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

Diversification Opportunities for Visa and Shandong Rike

0.48

Correlation Coefficient

Visa  Shandong Rike

Very weak diversification

The 3 months correlation between Visa and Shandong is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Shandong Rike Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Rike Chemical 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 Shandong Rike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Rike Chemical has no effect on the direction of Visa i.e., Visa and Shandong Rike go up and down completely randomly.

Pair Corralation between Visa and Shandong Rike

Taking into account the 90-day investment horizon Visa is expected to generate 4.28 times less return on investment than Shandong Rike. But when comparing it to its historical volatility, Visa Class A is 4.97 times less risky than Shandong Rike. It trades about 0.1 of its potential returns per unit of risk. Shandong Rike Chemical is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  574.00  in Shandong Rike Chemical on December 22, 2024 and sell it today you would earn a total of  113.00  from holding Shandong Rike Chemical or generate 19.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Visa Class A  vs.  Shandong Rike Chemical

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 7 (%) 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.

Shandong Rike Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Rike Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Rike sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Shandong Rike

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

The idea behind Visa Class A and Shandong Rike Chemical 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.