Correlation Between Visa and HDFC Asset

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

Diversification Opportunities for Visa and HDFC Asset

-0.62

Correlation Coefficient

Visa  HDFC Asset

Excellent diversification

The 3 months correlation between Visa and HDFC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and HDFC Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Asset Management 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 HDFC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Asset Management has no effect on the direction of Visa i.e., Visa and HDFC Asset go up and down completely randomly.

Pair Corralation between Visa and HDFC Asset

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than HDFC Asset. However, Visa Class A is 1.79 times less risky than HDFC Asset. It trades about 0.16 of its potential returns per unit of risk. HDFC Asset Management is currently generating about -0.04 per unit of risk. If you would invest  31,478  in Visa Class A on December 29, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  HDFC Asset Management

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 12 (%) 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.

HDFC Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HDFC Asset is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and HDFC Asset

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

The idea behind Visa Class A and HDFC Asset Management 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.