Correlation Between Visa and Dagang Nexchange

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

Diversification Opportunities for Visa and Dagang Nexchange

-0.63

Correlation Coefficient

Visa  Dagang Nexchange

Excellent diversification

The 3 months correlation between Visa and Dagang is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Dagang Nexchange Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dagang Nexchange Bhd 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 Dagang Nexchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dagang Nexchange Bhd has no effect on the direction of Visa i.e., Visa and Dagang Nexchange go up and down completely randomly.

Pair Corralation between Visa and Dagang Nexchange

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.3 times more return on investment than Dagang Nexchange. However, Visa Class A is 3.35 times less risky than Dagang Nexchange. It trades about 0.13 of its potential returns per unit of risk. Dagang Nexchange Bhd is currently generating about -0.15 per unit of risk. If you would invest  31,478  in Visa Class A on December 28, 2024 and sell it today you would earn a total of  2,807  from holding Visa Class A or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Visa Class A  vs.  Dagang Nexchange Bhd

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 April 2025.

Dagang Nexchange Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dagang Nexchange Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Visa and Dagang Nexchange

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

The idea behind Visa Class A and Dagang Nexchange Bhd 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.