Correlation Between Visa and Faraday Technology

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

Diversification Opportunities for Visa and Faraday Technology

-0.87

Correlation Coefficient

Visa  Faraday Technology

Pay attention - limited upside

The 3 months correlation between Visa and Faraday is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Faraday Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Technology Corp 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 Faraday Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Technology Corp has no effect on the direction of Visa i.e., Visa and Faraday Technology go up and down completely randomly.

Pair Corralation between Visa and Faraday Technology

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.62 times more return on investment than Faraday Technology. However, Visa Class A is 1.62 times less risky than Faraday Technology. It trades about 0.12 of its potential returns per unit of risk. Faraday Technology Corp is currently generating about -0.1 per unit of risk. If you would invest  28,482  in Visa Class A on September 12, 2024 and sell it today you would earn a total of  2,897  from holding Visa Class A or generate 10.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Faraday Technology Corp

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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 January 2025.

Faraday Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Visa and Faraday Technology

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

The idea behind Visa Class A and Faraday Technology Corp 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.