Correlation Between Visa and Ramco Cements

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

Diversification Opportunities for Visa and Ramco Cements

0.81

Correlation Coefficient

Visa  Ramco Cements

Very poor diversification

The 3 months correlation between Visa and Ramco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and The Ramco Cements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramco Cements 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 Ramco Cements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramco Cements has no effect on the direction of Visa i.e., Visa and Ramco Cements go up and down completely randomly.

Pair Corralation between Visa and Ramco Cements

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.64 times more return on investment than Ramco Cements. However, Visa Class A is 1.57 times less risky than Ramco Cements. It trades about 0.19 of its potential returns per unit of risk. The Ramco Cements is currently generating about 0.11 per unit of risk. If you would invest  27,640  in Visa Class A on October 9, 2024 and sell it today you would earn a total of  3,664  from holding Visa Class A or generate 13.26% return on investment over 90 days.

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

Visa Class A  vs.  The Ramco Cements

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Ramco Cements

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Ramco Cements are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Ramco Cements may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Ramco Cements

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

The idea behind Visa Class A and The Ramco Cements 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.