Correlation Between Visa and TGCC SA

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

Diversification Opportunities for Visa and TGCC SA

0.37

Correlation Coefficient

Visa  TGCC SA

Weak diversification

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

Pair Corralation between Visa and TGCC SA

Taking into account the 90-day investment horizon Visa is expected to generate 4.87 times less return on investment than TGCC SA. But when comparing it to its historical volatility, Visa Class A is 2.29 times less risky than TGCC SA. It trades about 0.12 of its potential returns per unit of risk. TGCC SA is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  46,945  in TGCC SA on October 23, 2024 and sell it today you would earn a total of  5,055  from holding TGCC SA or generate 10.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Visa Class A  vs.  TGCC SA

Visa Class A

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

TGCC SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TGCC SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, TGCC SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and TGCC SA

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

The idea behind Visa Class A and TGCC SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.