Correlation Between Visa and Yangmei Chemical

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

Diversification Opportunities for Visa and Yangmei Chemical

-0.28

Correlation Coefficient

Visa  Yangmei Chemical

Very good diversification

The 3 months correlation between Visa and Yangmei is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Yangmei Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yangmei Chemical 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 Yangmei Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yangmei Chemical has no effect on the direction of Visa i.e., Visa and Yangmei Chemical go up and down completely randomly.

Pair Corralation between Visa and Yangmei Chemical

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than Yangmei Chemical. However, Visa Class A is 1.8 times less risky than Yangmei Chemical. It trades about 0.16 of its potential returns per unit of risk. Yangmei Chemical Co is currently generating about -0.01 per unit of risk. If you would invest  31,478  in Visa Class A on December 29, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Visa Class A  vs.  Yangmei Chemical Co

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 12 (%) 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.

Yangmei Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yangmei Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yangmei Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Yangmei Chemical

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

The idea behind Visa Class A and Yangmei Chemical Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.