Correlation Between Visa and Te Chang

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

Diversification Opportunities for Visa and Te Chang

0.79

Correlation Coefficient

Visa  Te Chang

Poor diversification

The 3 months correlation between Visa and 5511 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang Construction 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 Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of Visa i.e., Visa and Te Chang go up and down completely randomly.

Pair Corralation between Visa and Te Chang

Taking into account the 90-day investment horizon Visa is expected to generate 2.08 times less return on investment than Te Chang. But when comparing it to its historical volatility, Visa Class A is 1.81 times less risky than Te Chang. It trades about 0.09 of its potential returns per unit of risk. Te Chang Construction is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,700  in Te Chang Construction on September 20, 2024 and sell it today you would earn a total of  3,580  from holding Te Chang Construction or generate 132.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.57%
Values	Daily Returns

Visa Class A  vs.  Te Chang Construction

Visa Class A

Risk-Adjusted Performance

11 of 100

OK

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Te Chang Construction

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Te Chang

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

The idea behind Visa Class A and Te Chang Construction 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.