Correlation Between Visa and Renuka Agri

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

Diversification Opportunities for Visa and Renuka Agri

0.28

Correlation Coefficient

Visa  Renuka Agri

Modest diversification

The 3 months correlation between Visa and Renuka is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Renuka Agri Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renuka Agri Foods 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 Renuka Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renuka Agri Foods has no effect on the direction of Visa i.e., Visa and Renuka Agri go up and down completely randomly.

Pair Corralation between Visa and Renuka Agri

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.39 times more return on investment than Renuka Agri. However, Visa Class A is 2.54 times less risky than Renuka Agri. It trades about 0.09 of its potential returns per unit of risk. Renuka Agri Foods is currently generating about -0.02 per unit of risk. If you would invest  20,311  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  11,112  from holding Visa Class A or generate 54.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.95%
Values	Daily Returns

Visa Class A  vs.  Renuka Agri Foods

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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 January 2025.

Renuka Agri Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renuka Agri Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renuka Agri sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Renuka Agri

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

The idea behind Visa Class A and Renuka Agri Foods 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.