Correlation Between Visa and POSCO Thainox

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

Diversification Opportunities for Visa and POSCO Thainox

-0.35

Correlation Coefficient

Visa  POSCO Thainox

Very good diversification

The 3 months correlation between Visa and POSCO is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and POSCO Thainox Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Thainox Public 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 POSCO Thainox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Thainox Public has no effect on the direction of Visa i.e., Visa and POSCO Thainox go up and down completely randomly.

Pair Corralation between Visa and POSCO Thainox

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.34 times more return on investment than POSCO Thainox. However, Visa Class A is 2.98 times less risky than POSCO Thainox. It trades about 0.09 of its potential returns per unit of risk. POSCO Thainox Public is currently generating about -0.07 per unit of risk. If you would invest  31,488  in Visa Class A on October 20, 2024 and sell it today you would earn a total of  474.00  from holding Visa Class A or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  POSCO Thainox Public

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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 February 2025.

POSCO Thainox Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO Thainox Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Visa and POSCO Thainox

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

The idea behind Visa Class A and POSCO Thainox Public 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.