Correlation Between Visa and SSIAM VNFIN

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

Diversification Opportunities for Visa and SSIAM VNFIN

-0.23

Correlation Coefficient

Visa  SSIAM VNFIN

Very good diversification

The 3 months correlation between Visa and SSIAM is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SSIAM VNFIN LEAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSIAM VNFIN LEAD 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 SSIAM VNFIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSIAM VNFIN LEAD has no effect on the direction of Visa i.e., Visa and SSIAM VNFIN go up and down completely randomly.

Pair Corralation between Visa and SSIAM VNFIN

Taking into account the 90-day investment horizon Visa is expected to generate 1.06 times less return on investment than SSIAM VNFIN. In addition to that, Visa is 1.05 times more volatile than SSIAM VNFIN LEAD. It trades about 0.09 of its total potential returns per unit of risk. SSIAM VNFIN LEAD is currently generating about 0.1 per unit of volatility. If you would invest  2,073,000  in SSIAM VNFIN LEAD on October 23, 2024 and sell it today you would earn a total of  77,000  from holding SSIAM VNFIN LEAD or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Visa Class A  vs.  SSIAM VNFIN LEAD

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

SSIAM VNFIN LEAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSIAM VNFIN LEAD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SSIAM VNFIN 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 SSIAM VNFIN

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

The idea behind Visa Class A and SSIAM VNFIN LEAD 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.