Correlation Between Visa and BANK CIMB

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

Diversification Opportunities for Visa and BANK CIMB

-0.65

Correlation Coefficient

Visa  BANK CIMB

Excellent diversification

The 3 months correlation between Visa and BANK is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BANK CIMB NIAGA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK CIMB NIAGA 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 BANK CIMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK CIMB NIAGA has no effect on the direction of Visa i.e., Visa and BANK CIMB go up and down completely randomly.

Pair Corralation between Visa and BANK CIMB

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.59 times more return on investment than BANK CIMB. However, Visa Class A is 1.69 times less risky than BANK CIMB. It trades about 0.13 of its potential returns per unit of risk. BANK CIMB NIAGA is currently generating about -0.08 per unit of risk. If you would invest  30,926  in Visa Class A on December 18, 2024 and sell it today you would earn a total of  2,529  from holding Visa Class A or generate 8.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  BANK CIMB NIAGA

Visa Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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.

BANK CIMB NIAGA

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK CIMB NIAGA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Visa and BANK CIMB

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

The idea behind Visa Class A and BANK CIMB NIAGA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.