Correlation Between Visa and CHAMPION BREWERIES

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

Diversification Opportunities for Visa and CHAMPION BREWERIES

0.77

Correlation Coefficient

Visa  CHAMPION BREWERIES

Poor diversification

The 3 months correlation between Visa and CHAMPION is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CHAMPION BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAMPION BREWERIES PLC 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 CHAMPION BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAMPION BREWERIES PLC has no effect on the direction of Visa i.e., Visa and CHAMPION BREWERIES go up and down completely randomly.

Pair Corralation between Visa and CHAMPION BREWERIES

Taking into account the 90-day investment horizon Visa is expected to generate 2.17 times less return on investment than CHAMPION BREWERIES. But when comparing it to its historical volatility, Visa Class A is 3.48 times less risky than CHAMPION BREWERIES. It trades about 0.11 of its potential returns per unit of risk. CHAMPION BREWERIES PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  378.00  in CHAMPION BREWERIES PLC on September 16, 2024 and sell it today you would earn a total of  12.00  from holding CHAMPION BREWERIES PLC or generate 3.17% return on investment over 90 days.

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

Visa Class A  vs.  CHAMPION BREWERIES PLC

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.

CHAMPION BREWERIES PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHAMPION BREWERIES PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, CHAMPION BREWERIES displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and CHAMPION BREWERIES

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

The idea behind Visa Class A and CHAMPION BREWERIES PLC 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.