Correlation Between Visa and Eratex Djaja

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

Diversification Opportunities for Visa and Eratex Djaja

-0.56

Correlation Coefficient

Visa  Eratex Djaja

Excellent diversification

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

Pair Corralation between Visa and Eratex Djaja

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.53 times more return on investment than Eratex Djaja. However, Visa Class A is 1.88 times less risky than Eratex Djaja. It trades about 0.1 of its potential returns per unit of risk. Eratex Djaja Tbk is currently generating about -0.15 per unit of risk. If you would invest  31,669  in Visa Class A on December 22, 2024 and sell it today you would earn a total of  1,897  from holding Visa Class A or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Visa Class A  vs.  Eratex Djaja Tbk

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 7 (%) 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.

Eratex Djaja Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eratex Djaja Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Visa and Eratex Djaja

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

The idea behind Visa Class A and Eratex Djaja Tbk 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.