Correlation Between Visa and SIMCERE PHARMAC

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

Diversification Opportunities for Visa and SIMCERE PHARMAC

0.37

Correlation Coefficient

Visa  SIMCERE PHARMAC

Weak diversification

The 3 months correlation between Visa and SIMCERE is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SIMCERE PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMCERE PHARMAC GRP 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 SIMCERE PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMCERE PHARMAC GRP has no effect on the direction of Visa i.e., Visa and SIMCERE PHARMAC go up and down completely randomly.

Pair Corralation between Visa and SIMCERE PHARMAC

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.7 times more return on investment than SIMCERE PHARMAC. However, Visa Class A is 1.43 times less risky than SIMCERE PHARMAC. It trades about -0.14 of its potential returns per unit of risk. SIMCERE PHARMAC GRP is currently generating about -0.15 per unit of risk. If you would invest  31,589  in Visa Class A on October 15, 2024 and sell it today you would lose (818.00) from holding Visa Class A or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.21%
Values	Daily Returns

Visa Class A  vs.  SIMCERE PHARMAC GRP

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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.

SIMCERE PHARMAC GRP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIMCERE PHARMAC GRP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIMCERE PHARMAC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and SIMCERE PHARMAC

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

The idea behind Visa Class A and SIMCERE PHARMAC GRP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.