Correlation Between Visa and Anhui Huaheng

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

Diversification Opportunities for Visa and Anhui Huaheng

-0.13

Correlation Coefficient

Visa  Anhui Huaheng

Good diversification

The 3 months correlation between Visa and Anhui is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Anhui Huaheng Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huaheng Biotec 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 Anhui Huaheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huaheng Biotec has no effect on the direction of Visa i.e., Visa and Anhui Huaheng go up and down completely randomly.

Pair Corralation between Visa and Anhui Huaheng

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.3 times more return on investment than Anhui Huaheng. However, Visa Class A is 3.38 times less risky than Anhui Huaheng. It trades about 0.2 of its potential returns per unit of risk. Anhui Huaheng Biotechnology is currently generating about -0.15 per unit of risk. If you would invest  27,633  in Visa Class A on October 3, 2024 and sell it today you would earn a total of  3,971  from holding Visa Class A or generate 14.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  Anhui Huaheng Biotechnology

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Anhui Huaheng Biotec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Huaheng Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Visa and Anhui Huaheng

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

The idea behind Visa Class A and Anhui Huaheng Biotechnology 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.