Correlation Between Visa and Link Net

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

Diversification Opportunities for Visa and Link Net

0.91

Correlation Coefficient

Visa  Link Net

Almost no diversification

The 3 months correlation between Visa and Link is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Link Net Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Link Net Tbk 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 Link Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Link Net Tbk has no effect on the direction of Visa i.e., Visa and Link Net go up and down completely randomly.

Pair Corralation between Visa and Link Net

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.26 times more return on investment than Link Net. However, Visa Class A is 3.78 times less risky than Link Net. It trades about 0.11 of its potential returns per unit of risk. Link Net Tbk is currently generating about 0.01 per unit of risk. If you would invest  21,122  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  15,149  from holding Visa Class A or generate 71.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.53%
Values	Daily Returns

Visa Class A  vs.  Link Net Tbk

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

Link Net Tbk

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Link Net Tbk are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Link Net disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Link Net

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

The idea behind Visa Class A and Link Net Tbk 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.