Correlation Between Visa and GBank Financial

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

Diversification Opportunities for Visa and GBank Financial

0.86

Correlation Coefficient

Visa  GBank Financial

Very poor diversification

The 3 months correlation between Visa and GBank is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and GBank Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBank Financial Holdings 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 GBank Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBank Financial Holdings has no effect on the direction of Visa i.e., Visa and GBank Financial go up and down completely randomly.

Pair Corralation between Visa and GBank Financial

Taking into account the 90-day investment horizon Visa is expected to generate 1.77 times less return on investment than GBank Financial. But when comparing it to its historical volatility, Visa Class A is 2.68 times less risky than GBank Financial. It trades about 0.25 of its potential returns per unit of risk. GBank Financial Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,885  in GBank Financial Holdings on September 27, 2024 and sell it today you would earn a total of  630.00  from holding GBank Financial Holdings or generate 21.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.67%
Values	Daily Returns

Visa Class A  vs.  GBank Financial Holdings

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.

GBank Financial Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GBank Financial Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, GBank Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and GBank Financial

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

The idea behind Visa Class A and GBank Financial Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.