Correlation Between Visa and Oneconnect Financial

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

Diversification Opportunities for Visa and Oneconnect Financial

0.85

Correlation Coefficient

Visa  Oneconnect Financial

Very poor diversification

The 3 months correlation between Visa and Oneconnect is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Oneconnect Financial Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oneconnect Financial 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 Oneconnect Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oneconnect Financial has no effect on the direction of Visa i.e., Visa and Oneconnect Financial go up and down completely randomly.

Pair Corralation between Visa and Oneconnect Financial

Taking into account the 90-day investment horizon Visa is expected to generate 6.43 times less return on investment than Oneconnect Financial. But when comparing it to its historical volatility, Visa Class A is 7.19 times less risky than Oneconnect Financial. It trades about 0.21 of its potential returns per unit of risk. Oneconnect Financial Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Oneconnect Financial Technology on November 28, 2024 and sell it today you would earn a total of  201.00  from holding Oneconnect Financial Technology or generate 80.4% return on investment over 90 days.

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

Visa Class A  vs.  Oneconnect Financial Technolog

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 16 (%) 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 March 2025.

Oneconnect Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oneconnect Financial Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Oneconnect Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Oneconnect Financial

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

The idea behind Visa Class A and Oneconnect Financial Technology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..