Correlation Between Visa and Jinling Hotel

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

Diversification Opportunities for Visa and Jinling Hotel

0.67

Correlation Coefficient

Visa  Jinling Hotel

Poor diversification

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

Pair Corralation between Visa and Jinling Hotel

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.42 times more return on investment than Jinling Hotel. However, Visa Class A is 2.41 times less risky than Jinling Hotel. It trades about 0.08 of its potential returns per unit of risk. Jinling Hotel Corp is currently generating about 0.0 per unit of risk. If you would invest  25,457  in Visa Class A on September 4, 2024 and sell it today you would earn a total of  5,844  from holding Visa Class A or generate 22.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.95%
Values	Daily Returns

Visa Class A  vs.  Jinling Hotel Corp

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 January 2025.

Jinling Hotel Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jinling Hotel Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinling Hotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Jinling Hotel

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

The idea behind Visa Class A and Jinling Hotel Corp 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..