Correlation Between Visa and Xinyuan Real

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

Diversification Opportunities for Visa and Xinyuan Real

-0.79

Correlation Coefficient

Visa  Xinyuan Real

Pay attention - limited upside

The 3 months correlation between Visa and Xinyuan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Xinyuan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyuan Real Estate 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 Xinyuan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyuan Real Estate has no effect on the direction of Visa i.e., Visa and Xinyuan Real go up and down completely randomly.

Pair Corralation between Visa and Xinyuan Real

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.2 times more return on investment than Xinyuan Real. However, Visa Class A is 4.9 times less risky than Xinyuan Real. It trades about 0.12 of its potential returns per unit of risk. Xinyuan Real Estate is currently generating about -0.1 per unit of risk. If you would invest  30,830  in Visa Class A on October 8, 2024 and sell it today you would earn a total of  661.00  from holding Visa Class A or generate 2.14% return on investment over 90 days.

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

Visa Class A  vs.  Xinyuan Real Estate

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.

Xinyuan Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinyuan Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Visa and Xinyuan Real

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

The idea behind Visa Class A and Xinyuan Real Estate 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.