Correlation Between Visa and FGV Holdings

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

Diversification Opportunities for Visa and FGV Holdings

0.29

Correlation Coefficient

Visa  FGV Holdings

Modest diversification

The 3 months correlation between Visa and FGV is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and FGV Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGV Holdings 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 FGV Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGV Holdings Bhd has no effect on the direction of Visa i.e., Visa and FGV Holdings go up and down completely randomly.

Pair Corralation between Visa and FGV Holdings

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the FGV Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.08 times less risky than FGV Holdings. The stock trades about -0.14 of its potential returns per unit of risk. The FGV Holdings Bhd is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  113.00  in FGV Holdings Bhd on October 15, 2024 and sell it today you would lose (3.00) from holding FGV Holdings Bhd or give up 2.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Visa Class A  vs.  FGV Holdings Bhd

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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 February 2025.

FGV Holdings Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FGV Holdings Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, FGV Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Visa and FGV Holdings

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

The idea behind Visa Class A and FGV Holdings 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.