Correlation Between Visa and Huaxia Eye

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

Diversification Opportunities for Visa and Huaxia Eye

0.33

Correlation Coefficient

Visa  Huaxia Eye

Weak diversification

The 3 months correlation between Visa and Huaxia is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Huaxia Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Eye Hospital 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 Huaxia Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Eye Hospital has no effect on the direction of Visa i.e., Visa and Huaxia Eye go up and down completely randomly.

Pair Corralation between Visa and Huaxia Eye

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.46 times more return on investment than Huaxia Eye. However, Visa Class A is 2.16 times less risky than Huaxia Eye. It trades about 0.12 of its potential returns per unit of risk. Huaxia Eye Hospital is currently generating about -0.04 per unit of risk. If you would invest  31,319  in Visa Class A on September 25, 2024 and sell it today you would earn a total of  746.00  from holding Visa Class A or generate 2.38% return on investment over 90 days.

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

Visa Class A  vs.  Huaxia Eye Hospital

Visa Class A

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 20 (%) 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.

Huaxia Eye Hospital

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Visa and Huaxia Eye

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

The idea behind Visa Class A and Huaxia Eye Hospital 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.