Correlation Between Visa and Boom Logistics

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

Diversification Opportunities for Visa and Boom Logistics

-0.36

Correlation Coefficient

Visa  Boom Logistics

Very good diversification

The 3 months correlation between Visa and Boom is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Boom Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boom Logistics 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 Boom Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boom Logistics has no effect on the direction of Visa i.e., Visa and Boom Logistics go up and down completely randomly.

Pair Corralation between Visa and Boom Logistics

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.89 times more return on investment than Boom Logistics. However, Visa Class A is 1.13 times less risky than Boom Logistics. It trades about 0.13 of its potential returns per unit of risk. Boom Logistics is currently generating about -0.02 per unit of risk. If you would invest  30,990  in Visa Class A on September 22, 2024 and sell it today you would earn a total of  781.00  from holding Visa Class A or generate 2.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Boom Logistics

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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.

Boom Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boom Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Boom Logistics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and Boom Logistics

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

The idea behind Visa Class A and Boom Logistics 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.