Correlation Between Visa and Benguet Corp

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

Diversification Opportunities for Visa and Benguet Corp

0.09

Correlation Coefficient

Visa  Benguet Corp

Significant diversification

The 3 months correlation between Visa and Benguet is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Benguet Corp A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benguet Corp A 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 Benguet Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benguet Corp A has no effect on the direction of Visa i.e., Visa and Benguet Corp go up and down completely randomly.

Pair Corralation between Visa and Benguet Corp

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.29 times more return on investment than Benguet Corp. However, Visa Class A is 3.46 times less risky than Benguet Corp. It trades about 0.17 of its potential returns per unit of risk. Benguet Corp A is currently generating about -0.01 per unit of risk. If you would invest  31,478  in Visa Class A on December 28, 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 Together
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

Visa Class A  vs.  Benguet Corp A

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 13 (%) 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.

Benguet Corp A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benguet Corp A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Benguet Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Benguet Corp

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

The idea behind Visa Class A and Benguet Corp A 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.