Correlation Between Visa and FIH MOBILE

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

Diversification Opportunities for Visa and FIH MOBILE

0.24

Correlation Coefficient

Visa  FIH MOBILE

Modest diversification

The 3 months correlation between Visa and FIH is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and FIH MOBILE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIH MOBILE 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 FIH MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIH MOBILE has no effect on the direction of Visa i.e., Visa and FIH MOBILE go up and down completely randomly.

Pair Corralation between Visa and FIH MOBILE

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.73 times more return on investment than FIH MOBILE. However, Visa Class A is 1.37 times less risky than FIH MOBILE. It trades about 0.08 of its potential returns per unit of risk. FIH MOBILE is currently generating about 0.02 per unit of risk. If you would invest  21,956  in Visa Class A on October 8, 2024 and sell it today you would earn a total of  9,348  from holding Visa Class A or generate 42.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.0%
Values	Daily Returns

Visa Class A  vs.  FIH MOBILE

Visa Class A

Risk-Adjusted Performance

15 of 100

Solid

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.

FIH MOBILE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIH MOBILE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FIH MOBILE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and FIH MOBILE

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

The idea behind Visa Class A and FIH MOBILE 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.