Correlation Between Visa and Hilton Metal

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

Diversification Opportunities for Visa and Hilton Metal

-0.64

Correlation Coefficient

Visa  Hilton Metal

Excellent diversification

The 3 months correlation between Visa and Hilton is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hilton Metal Forging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Metal Forging 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 Hilton Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Metal Forging has no effect on the direction of Visa i.e., Visa and Hilton Metal go up and down completely randomly.

Pair Corralation between Visa and Hilton Metal

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.24 times more return on investment than Hilton Metal. However, Visa Class A is 4.13 times less risky than Hilton Metal. It trades about 0.16 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about -0.09 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.  Hilton Metal Forging

Visa Class A

Risk-Adjusted Performance

Good

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.

Hilton Metal Forging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Metal Forging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Visa and Hilton Metal

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

The idea behind Visa Class A and Hilton Metal Forging 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.