Correlation Between Visa and Utime

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

Diversification Opportunities for Visa and Utime

0.62

Correlation Coefficient

Visa  Utime

Poor diversification

The 3 months correlation between Visa and Utime is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Utime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utime 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 Utime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utime has no effect on the direction of Visa i.e., Visa and Utime go up and down completely randomly.

Pair Corralation between Visa and Utime

Taking into account the 90-day investment horizon Visa is expected to generate 13.55 times less return on investment than Utime. But when comparing it to its historical volatility, Visa Class A is 22.24 times less risky than Utime. It trades about 0.07 of its potential returns per unit of risk. Utime is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Utime on October 11, 2024 and sell it today you would lose (51.00) from holding Utime or give up 48.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	25.81%
Values	Daily Returns

Visa Class A  vs.  Utime

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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.

Utime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Utime is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Utime

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

The idea behind Visa Class A and Utime 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.