Correlation Between Visa and Adamjee Insurance

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

Diversification Opportunities for Visa and Adamjee Insurance

0.71

Correlation Coefficient

Visa  Adamjee Insurance

Poor diversification

The 3 months correlation between Visa and Adamjee is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance 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 Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Visa i.e., Visa and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Visa and Adamjee Insurance

Taking into account the 90-day investment horizon Visa is expected to generate 6.43 times less return on investment than Adamjee Insurance. But when comparing it to its historical volatility, Visa Class A is 3.89 times less risky than Adamjee Insurance. It trades about 0.09 of its potential returns per unit of risk. Adamjee Insurance is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,177  in Adamjee Insurance on October 22, 2024 and sell it today you would earn a total of  896.00  from holding Adamjee Insurance or generate 21.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Adamjee Insurance

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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 February 2025.

Adamjee Insurance

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adamjee Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Adamjee Insurance

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

The idea behind Visa Class A and Adamjee Insurance 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.