Correlation Between Visa and TNP Old

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

Diversification Opportunities for Visa and TNP Old

0.65

Correlation Coefficient

Visa  TNP Old

Poor diversification

The 3 months correlation between Visa and TNP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and TNP Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TNP Old 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 TNP Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TNP Old has no effect on the direction of Visa i.e., Visa and TNP Old go up and down completely randomly.

Pair Corralation between Visa and TNP Old

If you would invest  28,365  in Visa Class A on October 26, 2024 and sell it today you would earn a total of  3,991  from holding Visa Class A or generate 14.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.69%
Values	Daily Returns

Visa Class A  vs.  TNP Old

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

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.

TNP Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TNP Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, TNP Old is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Visa and TNP Old

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

The idea behind Visa Class A and TNP Old 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.