Correlation Between Visa and Jiangxi Sunshine

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

Diversification Opportunities for Visa and Jiangxi Sunshine

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Visa and Jiangxi is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Jiangxi Sunshine Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Sunshine Dairy 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 Jiangxi Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Sunshine Dairy has no effect on the direction of Visa i.e., Visa and Jiangxi Sunshine go up and down completely randomly.

Pair Corralation between Visa and Jiangxi Sunshine

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.44 times more return on investment than Jiangxi Sunshine. However, Visa Class A is 2.27 times less risky than Jiangxi Sunshine. It trades about 0.09 of its potential returns per unit of risk. Jiangxi Sunshine Dairy is currently generating about 0.0 per unit of risk. If you would invest  20,311  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  11,272  from holding Visa Class A or generate 55.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy96.16%
ValuesDaily Returns

Visa Class A  vs.  Jiangxi Sunshine Dairy

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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 January 2025.
Jiangxi Sunshine Dairy 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Sunshine Dairy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Sunshine sustained solid returns over the last few months and may actually be approaching a breakup point.

Visa and Jiangxi Sunshine Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Jiangxi Sunshine

The main advantage of trading using opposite Visa and Jiangxi Sunshine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Jiangxi Sunshine 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 Jiangxi Sunshine will offset losses from the drop in Jiangxi Sunshine's long position.
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The idea behind Visa Class A and Jiangxi Sunshine Dairy 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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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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