Correlation Between Visa and Hung Chou
Can any of the company-specific risk be diversified away by investing in both Visa and Hung Chou 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 Hung Chou 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 Hung Chou Fiber, you can compare the effects of market volatilities on Visa and Hung Chou 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 Hung Chou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Hung Chou.
Diversification Opportunities for Visa and Hung Chou
Average diversification
The 3 months correlation between Visa and Hung is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hung Chou Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hung Chou Fiber 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 Hung Chou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hung Chou Fiber has no effect on the direction of Visa i.e., Visa and Hung Chou go up and down completely randomly.
Pair Corralation between Visa and Hung Chou
Taking into account the 90-day investment horizon Visa is expected to generate 1.04 times less return on investment than Hung Chou. But when comparing it to its historical volatility, Visa Class A is 1.03 times less risky than Hung Chou. It trades about 0.4 of its potential returns per unit of risk. Hung Chou Fiber is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 966.00 in Hung Chou Fiber on August 30, 2024 and sell it today you would earn a total of 119.00 from holding Hung Chou Fiber or generate 12.32% 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. Hung Chou Fiber
Performance |
| Timeline |
| Visa Class A |
| Hung Chou Fiber |
Visa and Hung Chou Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Hung Chou
The main advantage of trading using opposite Visa and Hung Chou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Hung Chou 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 Hung Chou will offset losses from the drop in Hung Chou's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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