Correlation Between Visa and COSCO SHIPPING

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

Diversification Opportunities for Visa and COSCO SHIPPING

0.01

Correlation Coefficient

Visa  COSCO SHIPPING

Significant diversification

The 3 months correlation between Visa and COSCO is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and COSCO SHIPPING Ports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING Ports 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 COSCO SHIPPING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO SHIPPING Ports has no effect on the direction of Visa i.e., Visa and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Visa and COSCO SHIPPING

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.8 times more return on investment than COSCO SHIPPING. However, Visa Class A is 1.25 times less risky than COSCO SHIPPING. It trades about 0.24 of its potential returns per unit of risk. COSCO SHIPPING Ports is currently generating about 0.03 per unit of risk. If you would invest  26,911  in Visa Class A on September 25, 2024 and sell it today you would earn a total of  4,811  from holding Visa Class A or generate 17.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  COSCO SHIPPING Ports

Visa Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

COSCO SHIPPING Ports

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSCO SHIPPING Ports are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, COSCO SHIPPING 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 COSCO SHIPPING

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

The idea behind Visa Class A and COSCO SHIPPING Ports 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.