Correlation Between Visa and Wah Lee

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

Diversification Opportunities for Visa and Wah Lee

-0.43

Correlation Coefficient

Visa  Wah Lee

Very good diversification

The 3 months correlation between Visa and Wah is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Wah Lee Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Lee Industrial 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 Wah Lee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Lee Industrial has no effect on the direction of Visa i.e., Visa and Wah Lee go up and down completely randomly.

Pair Corralation between Visa and Wah Lee

Taking into account the 90-day investment horizon Visa is expected to generate 4.73 times less return on investment than Wah Lee. But when comparing it to its historical volatility, Visa Class A is 2.07 times less risky than Wah Lee. It trades about 0.11 of its potential returns per unit of risk. Wah Lee Industrial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  11,850  in Wah Lee Industrial on September 16, 2024 and sell it today you would earn a total of  1,000.00  from holding Wah Lee Industrial or generate 8.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Wah Lee Industrial

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wah Lee Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Lee Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wah Lee 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 Wah Lee

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

The idea behind Visa Class A and Wah Lee Industrial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.