Correlation Between Visa and Chialin Precision

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

Diversification Opportunities for Visa and Chialin Precision

0.69

Correlation Coefficient

Visa  Chialin Precision

Poor diversification

The 3 months correlation between Visa and Chialin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Chialin Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chialin Precision 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 Chialin Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chialin Precision has no effect on the direction of Visa i.e., Visa and Chialin Precision go up and down completely randomly.

Pair Corralation between Visa and Chialin Precision

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.89 times more return on investment than Chialin Precision. However, Visa Class A is 1.12 times less risky than Chialin Precision. It trades about 0.19 of its potential returns per unit of risk. Chialin Precision Industrial is currently generating about 0.14 per unit of risk. If you would invest  28,322  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  3,640  from holding Visa Class A or generate 12.85% return on investment over 90 days.

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

Visa Class A  vs.  Chialin Precision Industrial

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Chialin Precision

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chialin Precision Industrial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chialin Precision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Chialin Precision

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

The idea behind Visa Class A and Chialin Precision 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.