Correlation Between Visa and CITIC

Can any of the company-specific risk be diversified away by investing in both Visa and CITIC 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 CITIC 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 CITIC LTD ADR5, you can compare the effects of market volatilities on Visa and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and CITIC.

Diversification Opportunities for Visa and CITIC

0.15

Correlation Coefficient

Visa  CITIC

Average diversification

The 3 months correlation between Visa and CITIC is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of Visa i.e., Visa and CITIC go up and down completely randomly.

Pair Corralation between Visa and CITIC

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.51 times more return on investment than CITIC. However, Visa Class A is 1.97 times less risky than CITIC. It trades about 0.06 of its potential returns per unit of risk. CITIC LTD ADR5 is currently generating about -0.08 per unit of risk. If you would invest  30,830  in Visa Class A on October 10, 2024 and sell it today you would earn a total of  337.00  from holding Visa Class A or generate 1.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Visa Class A  vs.  CITIC LTD ADR5

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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 February 2025.

CITIC LTD ADR5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC LTD ADR5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CITIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and CITIC

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

The idea behind Visa Class A and CITIC LTD ADR5 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.