Correlation Between Visa and Export Development

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

Diversification Opportunities for Visa and Export Development

0.88

Correlation Coefficient

Visa  Export Development

Very poor diversification

The 3 months correlation between Visa and Export is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Export Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Export Development Bank 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 Export Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Export Development Bank has no effect on the direction of Visa i.e., Visa and Export Development go up and down completely randomly.

Pair Corralation between Visa and Export Development

Taking into account the 90-day investment horizon Visa is expected to generate 1.93 times less return on investment than Export Development. But when comparing it to its historical volatility, Visa Class A is 3.66 times less risky than Export Development. It trades about 0.08 of its potential returns per unit of risk. Export Development Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,204  in Export Development Bank on September 28, 2024 and sell it today you would earn a total of  544.00  from holding Export Development Bank or generate 45.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	77.98%
Values	Daily Returns

Visa Class A  vs.  Export Development Bank

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

Export Development Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Export Development Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Export Development may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Export Development

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

The idea behind Visa Class A and Export Development Bank 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.