Correlation Between Visa and AXT

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

Diversification Opportunities for Visa and AXT

-0.63

Correlation Coefficient

Visa  AXT

Excellent diversification

The 3 months correlation between Visa and AXT is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc 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 AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Visa i.e., Visa and AXT go up and down completely randomly.

Pair Corralation between Visa and AXT

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.24 times more return on investment than AXT. However, Visa Class A is 4.17 times less risky than AXT. It trades about 0.09 of its potential returns per unit of risk. AXT Inc is currently generating about -0.06 per unit of risk. If you would invest  27,522  in Visa Class A on September 21, 2024 and sell it today you would earn a total of  3,966  from holding Visa Class A or generate 14.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  AXT Inc

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AXT Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AXT Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, AXT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and AXT

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

The idea behind Visa Class A and AXT Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.