Correlation Between Visa and CITIC
Can any of the company-specific risk be diversified away by investing in both Visa and CITIC 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 CITIC 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 CITIC LTD ADR5, you can compare the effects of market volatilities on Visa and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and CITIC.
Diversification Opportunities for Visa and CITIC
Weak diversification
The 3 months correlation between Visa and CITIC is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of Visa i.e., Visa and CITIC go up and down completely randomly.
Pair Corralation between Visa and CITIC
Taking into account the 90-day investment horizon Visa is expected to generate 1.79 times less return on investment than CITIC. But when comparing it to its historical volatility, Visa Class A is 2.43 times less risky than CITIC. It trades about 0.09 of its potential returns per unit of risk. CITIC LTD ADR5 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 368.00 in CITIC LTD ADR5 on August 29, 2024 and sell it today you would earn a total of 142.00 from holding CITIC LTD ADR5 or generate 38.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Visa Class A vs. CITIC LTD ADR5
Performance |
| Timeline |
| Visa Class A |
| CITIC LTD ADR5 |
Visa and CITIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and CITIC
The main advantage of trading using opposite Visa and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, CITIC 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 CITIC will offset losses from the drop in CITIC's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| CITIC vs. Superior Plus Corp | CITIC vs. NMI Holdings | CITIC vs. Origin Agritech | CITIC vs. SIVERS SEMICONDUCTORS AB |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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