Correlation Between Visa and Henderson Investment

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

Diversification Opportunities for Visa and Henderson Investment

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Visa and Henderson is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Henderson Investment Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Investment 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 Henderson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Investment has no effect on the direction of Visa i.e., Visa and Henderson Investment go up and down completely randomly.

Pair Corralation between Visa and Henderson Investment

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.12 times more return on investment than Henderson Investment. However, Visa Class A is 8.13 times less risky than Henderson Investment. It trades about 0.19 of its potential returns per unit of risk. Henderson Investment Ltd is currently generating about -0.13 per unit of risk. If you would invest  28,322  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  3,640  from holding Visa Class A or generate 12.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Visa Class A  vs.  Henderson Investment Ltd

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
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.
Henderson Investment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Henderson Investment Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Visa and Henderson Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Henderson Investment

The main advantage of trading using opposite Visa and Henderson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Henderson Investment 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 Henderson Investment will offset losses from the drop in Henderson Investment's long position.
The idea behind Visa Class A and Henderson Investment Ltd 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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