Correlation Between Visa and YTL Hospitality

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

Diversification Opportunities for Visa and YTL Hospitality

-0.13

Correlation Coefficient

Visa  YTL Hospitality

Good diversification

The 3 months correlation between Visa and YTL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and YTL Hospitality REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YTL Hospitality REIT 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 YTL Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YTL Hospitality REIT has no effect on the direction of Visa i.e., Visa and YTL Hospitality go up and down completely randomly.

Pair Corralation between Visa and YTL Hospitality

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.84 times more return on investment than YTL Hospitality. However, Visa Class A is 1.19 times less risky than YTL Hospitality. It trades about 0.23 of its potential returns per unit of risk. YTL Hospitality REIT is currently generating about -0.13 per unit of risk. If you would invest  31,455  in Visa Class A on November 29, 2024 and sell it today you would earn a total of  4,128  from holding Visa Class A or generate 13.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Visa Class A  vs.  YTL Hospitality REIT

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

YTL Hospitality REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days YTL Hospitality REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Visa and YTL Hospitality

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

The idea behind Visa Class A and YTL Hospitality REIT 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.