Correlation Between Visa and MFEC PCL

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

Diversification Opportunities for Visa and MFEC PCL

-0.37

Correlation Coefficient

Visa  MFEC PCL

Very good diversification

The 3 months correlation between Visa and MFEC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and MFEC PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFEC PCL 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 MFEC PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFEC PCL has no effect on the direction of Visa i.e., Visa and MFEC PCL go up and down completely randomly.

Pair Corralation between Visa and MFEC PCL

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.85 times more return on investment than MFEC PCL. However, Visa Class A is 1.18 times less risky than MFEC PCL. It trades about 0.08 of its potential returns per unit of risk. MFEC PCL is currently generating about 0.02 per unit of risk. If you would invest  32,011  in Visa Class A on December 24, 2024 and sell it today you would earn a total of  1,555  from holding Visa Class A or generate 4.86% return on investment over 90 days.

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

Visa Class A  vs.  MFEC PCL

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 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

MFEC PCL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFEC PCL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, MFEC PCL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Visa and MFEC PCL

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

The idea behind Visa Class A and MFEC PCL 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.