Correlation Between Visa and Shenzhen Hans

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

Diversification Opportunities for Visa and Shenzhen Hans

0.43

Correlation Coefficient

Visa  Shenzhen Hans

Very weak diversification

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

Pair Corralation between Visa and Shenzhen Hans

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.35 times more return on investment than Shenzhen Hans. However, Visa Class A is 2.89 times less risky than Shenzhen Hans. It trades about 0.22 of its potential returns per unit of risk. Shenzhen Hans CNC is currently generating about 0.06 per unit of risk. If you would invest  28,119  in Visa Class A on October 25, 2024 and sell it today you would earn a total of  4,237  from holding Visa Class A or generate 15.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Shenzhen Hans CNC

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

Shenzhen Hans CNC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Hans CNC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Hans sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Shenzhen Hans

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

The idea behind Visa Class A and Shenzhen Hans CNC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.