Correlation Between Visa and Jardine Matheson

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

Diversification Opportunities for Visa and Jardine Matheson

-0.57

Correlation Coefficient

Visa  Jardine Matheson

Excellent diversification

The 3 months correlation between Visa and Jardine is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Jardine Matheson Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Matheson 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 Jardine Matheson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Matheson Holdings has no effect on the direction of Visa i.e., Visa and Jardine Matheson go up and down completely randomly.

Pair Corralation between Visa and Jardine Matheson

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.58 times more return on investment than Jardine Matheson. However, Visa Class A is 1.72 times less risky than Jardine Matheson. It trades about 0.11 of its potential returns per unit of risk. Jardine Matheson Holdings is currently generating about 0.01 per unit of risk. If you would invest  31,435  in Visa Class A on December 19, 2024 and sell it today you would earn a total of  2,042  from holding Visa Class A or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Jardine Matheson Holdings

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 8 (%) 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.

Jardine Matheson Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jardine Matheson Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Jardine Matheson is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and Jardine Matheson

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

The idea behind Visa Class A and Jardine Matheson 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.