Correlation Between Visa and Clean Power

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

Diversification Opportunities for Visa and Clean Power

-0.49

Correlation Coefficient

Visa  Clean Power

Very good diversification

The 3 months correlation between Visa and Clean is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Clean Power Hydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Power Hydrogen 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 Clean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Power Hydrogen has no effect on the direction of Visa i.e., Visa and Clean Power go up and down completely randomly.

Pair Corralation between Visa and Clean Power

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.24 times more return on investment than Clean Power. However, Visa Class A is 4.14 times less risky than Clean Power. It trades about 0.21 of its potential returns per unit of risk. Clean Power Hydrogen is currently generating about -0.03 per unit of risk. If you would invest  28,268  in Visa Class A on October 24, 2024 and sell it today you would earn a total of  4,076  from holding Visa Class A or generate 14.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Clean Power Hydrogen

Visa Class A

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

Clean Power Hydrogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Power Hydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Visa and Clean Power

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

The idea behind Visa Class A and Clean Power Hydrogen 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.