Correlation Between Visa and RMB Holdings
Can any of the company-specific risk be diversified away by investing in both Visa and RMB Holdings 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 RMB Holdings 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 RMB Holdings, you can compare the effects of market volatilities on Visa and RMB Holdings 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 RMB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and RMB Holdings.
Diversification Opportunities for Visa and RMB Holdings
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and RMB is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Visa i.e., Visa and RMB Holdings go up and down completely randomly.
Pair Corralation between Visa and RMB Holdings
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.32 times more return on investment than RMB Holdings. However, Visa Class A is 3.08 times less risky than RMB Holdings. It trades about 0.09 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.01 per unit of risk. If you would invest 24,482 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 7,183 from holding Visa Class A or generate 29.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.35% |
| Values | Daily Returns |
Visa Class A vs. RMB Holdings
Performance |
| Timeline |
| Visa Class A |
| RMB Holdings |
Visa and RMB Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and RMB Holdings
The main advantage of trading using opposite Visa and RMB Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, RMB Holdings 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 RMB Holdings will offset losses from the drop in RMB Holdings' long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| RMB Holdings vs. ABSA Bank Limited | RMB Holdings vs. Investec | RMB Holdings vs. Sasol Ltd Bee | RMB Holdings vs. Centaur Bci Balanced |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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