Correlation Between Visa and AVALON TECHNOLOGIES

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

Diversification Opportunities for Visa and AVALON TECHNOLOGIES

-0.78

Correlation Coefficient

Visa  AVALON TECHNOLOGIES

Pay attention - limited upside

The 3 months correlation between Visa and AVALON is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AVALON TECHNOLOGIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVALON TECHNOLOGIES LTD 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 AVALON TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVALON TECHNOLOGIES LTD has no effect on the direction of Visa i.e., Visa and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Visa and AVALON TECHNOLOGIES

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.3 times more return on investment than AVALON TECHNOLOGIES. However, Visa Class A is 3.33 times less risky than AVALON TECHNOLOGIES. It trades about 0.16 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about -0.09 per unit of risk. If you would invest  31,478  in Visa Class A on December 29, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

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

Visa Class A  vs.  AVALON TECHNOLOGIES LTD

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Visa and AVALON TECHNOLOGIES

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

The idea behind Visa Class A and AVALON TECHNOLOGIES LTD 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.