Correlation Between Visa and Futuris

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

Diversification Opportunities for Visa and Futuris

0.21

Correlation Coefficient

Visa  Futuris

Modest diversification

The 3 months correlation between Visa and Futuris is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Futuris Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futuris Company 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 Futuris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futuris Company has no effect on the direction of Visa i.e., Visa and Futuris go up and down completely randomly.

Pair Corralation between Visa and Futuris

Taking into account the 90-day investment horizon Visa is expected to generate 4.92 times less return on investment than Futuris. But when comparing it to its historical volatility, Visa Class A is 7.98 times less risky than Futuris. It trades about 0.13 of its potential returns per unit of risk. Futuris Company is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.55  in Futuris Company on December 27, 2024 and sell it today you would earn a total of  0.35  from holding Futuris Company or generate 22.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Visa Class A  vs.  Futuris Company

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 9 (%) 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.

Futuris Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Futuris Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Futuris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Futuris

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

The idea behind Visa Class A and Futuris Company 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.