Correlation Between Visa and Trina Solar

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

Diversification Opportunities for Visa and Trina Solar

VisaTrinaDiversified AwayVisaTrinaDiversified Away100%
0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Visa and Trina is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Trina Solar Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trina Solar 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 Trina Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trina Solar has no effect on the direction of Visa i.e., Visa and Trina Solar go up and down completely randomly.

Pair Corralation between Visa and Trina Solar

Taking into account the 90-day investment horizon Visa is expected to generate 1.62 times less return on investment than Trina Solar. But when comparing it to its historical volatility, Visa Class A is 4.74 times less risky than Trina Solar. It trades about 0.25 of its potential returns per unit of risk. Trina Solar Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,754  in Trina Solar Co on September 26, 2024 and sell it today you would earn a total of  361.00  from holding Trina Solar Co or generate 20.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Visa Class A  vs.  Trina Solar Co

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0204060
JavaScript chart by amCharts 3.21.15V 688599
       Timeline  
Visa Class A 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec280290300310320
Trina Solar 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Trina Solar Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trina Solar sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec18202224262830

Visa and Trina Solar Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.0-2.99-1.99-0.990.01671.052.123.24.27 0.050.100.150.20
JavaScript chart by amCharts 3.21.15V 688599
       Returns  

Pair Trading with Visa and Trina Solar

The main advantage of trading using opposite Visa and Trina Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Trina Solar 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 Trina Solar will offset losses from the drop in Trina Solar's long position.
The idea behind Visa Class A and Trina Solar 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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