Correlation Between Visa and VanEck Vietnam

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

Diversification Opportunities for Visa and VanEck Vietnam

0.12

Correlation Coefficient

Visa  VanEck Vietnam

Average diversification

The 3 months correlation between Visa and VanEck is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and VanEck Vietnam ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vietnam ETF 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 VanEck Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vietnam ETF has no effect on the direction of Visa i.e., Visa and VanEck Vietnam go up and down completely randomly.

Pair Corralation between Visa and VanEck Vietnam

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.78 times more return on investment than VanEck Vietnam. However, Visa Class A is 1.29 times less risky than VanEck Vietnam. It trades about 0.11 of its potential returns per unit of risk. VanEck Vietnam ETF is currently generating about -0.03 per unit of risk. If you would invest  24,441  in Visa Class A on December 2, 2024 and sell it today you would earn a total of  11,830  from holding Visa Class A or generate 48.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  VanEck Vietnam ETF

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

VanEck Vietnam ETF

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vietnam ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Vietnam is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and VanEck Vietnam

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

The idea behind Visa Class A and VanEck Vietnam ETF 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.