Correlation Between Visa and EMERCOIN

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

Diversification Opportunities for Visa and EMERCOIN

-0.56

Correlation Coefficient

Visa  EMERCOIN

Excellent diversification

The 3 months correlation between Visa and EMERCOIN is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and EMERCOIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMERCOIN 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 EMERCOIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMERCOIN has no effect on the direction of Visa i.e., Visa and EMERCOIN go up and down completely randomly.

Pair Corralation between Visa and EMERCOIN

Taking into account the 90-day investment horizon Visa is expected to generate 1.73 times less return on investment than EMERCOIN. But when comparing it to its historical volatility, Visa Class A is 20.83 times less risky than EMERCOIN. It trades about 0.13 of its potential returns per unit of risk. EMERCOIN is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.65  in EMERCOIN on December 30, 2024 and sell it today you would lose (0.55) from holding EMERCOIN or give up 84.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Visa Class A  vs.  EMERCOIN

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 April 2025.

EMERCOIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days EMERCOIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady fundamental indicators, EMERCOIN demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and EMERCOIN

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

The idea behind Visa Class A and EMERCOIN 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.