Correlation Between Visa and UOB Kay

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

Diversification Opportunities for Visa and UOB Kay

0.64

Correlation Coefficient

Visa  UOB Kay

Poor diversification

The 3 months correlation between Visa and UOB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and UOB Kay Hian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UOB Kay Hian 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 UOB Kay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UOB Kay Hian has no effect on the direction of Visa i.e., Visa and UOB Kay go up and down completely randomly.

Pair Corralation between Visa and UOB Kay

Taking into account the 90-day investment horizon Visa is expected to generate 38.08 times less return on investment than UOB Kay. But when comparing it to its historical volatility, Visa Class A is 78.69 times less risky than UOB Kay. It trades about 0.17 of its potential returns per unit of risk. UOB Kay Hian is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  500.00  in UOB Kay Hian on October 26, 2024 and sell it today you would earn a total of  30.00  from holding UOB Kay Hian or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.58%
Values	Daily Returns

Visa Class A  vs.  UOB Kay Hian

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.

UOB Kay Hian

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UOB Kay Hian are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, UOB Kay may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and UOB Kay

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

The idea behind Visa Class A and UOB Kay Hian 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.