Correlation Between Visa and RomReal

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

Diversification Opportunities for Visa and RomReal

-0.38

Correlation Coefficient

Visa  RomReal

Very good diversification

The 3 months correlation between Visa and RomReal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and RomReal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RomReal Limited 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 RomReal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RomReal Limited has no effect on the direction of Visa i.e., Visa and RomReal go up and down completely randomly.

Pair Corralation between Visa and RomReal

Taking into account the 90-day investment horizon Visa is expected to generate 6.75 times less return on investment than RomReal. But when comparing it to its historical volatility, Visa Class A is 7.76 times less risky than RomReal. It trades about 0.09 of its potential returns per unit of risk. RomReal Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  272.00  in RomReal Limited on October 20, 2024 and sell it today you would earn a total of  16.00  from holding RomReal Limited or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Visa Class A  vs.  RomReal Limited

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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 February 2025.

RomReal Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RomReal Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating primary indicators, RomReal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and RomReal

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

The idea behind Visa Class A and RomReal Limited 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..