Correlation Between Visa and Chinese Universe

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

Diversification Opportunities for Visa and Chinese Universe

-0.67

Correlation Coefficient

Visa  Chinese Universe

Excellent diversification

The 3 months correlation between Visa and Chinese is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Chinese Universe Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Universe Pub 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 Chinese Universe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Universe Pub has no effect on the direction of Visa i.e., Visa and Chinese Universe go up and down completely randomly.

Pair Corralation between Visa and Chinese Universe

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.55 times more return on investment than Chinese Universe. However, Visa Class A is 1.83 times less risky than Chinese Universe. It trades about 0.21 of its potential returns per unit of risk. Chinese Universe Publishing is currently generating about -0.09 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  3,608  from holding Visa Class A or generate 11.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.61%
Values	Daily Returns

Visa Class A  vs.  Chinese Universe Publishing

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 16 (%) 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 March 2025.

Chinese Universe Pub

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chinese Universe Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Visa and Chinese Universe

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

The idea behind Visa Class A and Chinese Universe Publishing 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..