Correlation Between Visa and Provident Agro

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

Diversification Opportunities for Visa and Provident Agro

-0.61

Correlation Coefficient

Visa  Provident Agro

Excellent diversification

The 3 months correlation between Visa and Provident is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Provident Agro Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Agro 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 Provident Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Agro Tbk has no effect on the direction of Visa i.e., Visa and Provident Agro go up and down completely randomly.

Pair Corralation between Visa and Provident Agro

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.36 times more return on investment than Provident Agro. However, Visa Class A is 2.78 times less risky than Provident Agro. It trades about 0.16 of its potential returns per unit of risk. Provident Agro Tbk is currently generating about 0.0 per unit of risk. If you would invest  31,478  in Visa Class A on December 29, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Provident Agro Tbk

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Provident Agro Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Provident Agro Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Provident Agro 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 Provident Agro

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

The idea behind Visa Class A and Provident Agro 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.