Correlation Between Visa and Hengdian Entertainment

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

Diversification Opportunities for Visa and Hengdian Entertainment

0.01

Correlation Coefficient

Visa  Hengdian Entertainment

Significant diversification

The 3 months correlation between Visa and Hengdian is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hengdian Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengdian Entertainment 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 Hengdian Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengdian Entertainment has no effect on the direction of Visa i.e., Visa and Hengdian Entertainment go up and down completely randomly.

Pair Corralation between Visa and Hengdian Entertainment

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.31 times more return on investment than Hengdian Entertainment. However, Visa Class A is 3.24 times less risky than Hengdian Entertainment. It trades about 0.13 of its potential returns per unit of risk. Hengdian Entertainment Co is currently generating about -0.03 per unit of risk. If you would invest  31,478  in Visa Class A on December 30, 2024 and sell it today you would earn a total of  2,807  from holding Visa Class A or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Visa Class A  vs.  Hengdian Entertainment Co

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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.

Hengdian Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hengdian Entertainment Co 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 Hengdian Entertainment

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

The idea behind Visa Class A and Hengdian Entertainment 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 CEOs Directory module to screen CEOs from public companies around the world.