Correlation Between Visa and CAIRN HOMES

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

Diversification Opportunities for Visa and CAIRN HOMES

0.48

Correlation Coefficient

Visa  CAIRN HOMES

Very weak diversification

The 3 months correlation between Visa and CAIRN is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of Visa i.e., Visa and CAIRN HOMES go up and down completely randomly.

Pair Corralation between Visa and CAIRN HOMES

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.35 times more return on investment than CAIRN HOMES. However, Visa Class A is 2.89 times less risky than CAIRN HOMES. It trades about 0.05 of its potential returns per unit of risk. CAIRN HOMES EO is currently generating about -0.25 per unit of risk. If you would invest  31,722  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  240.00  from holding Visa Class A or generate 0.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Visa Class A  vs.  CAIRN HOMES EO

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

CAIRN HOMES EO

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CAIRN HOMES EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CAIRN HOMES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and CAIRN HOMES

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

The idea behind Visa Class A and CAIRN HOMES EO 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.