Correlation Between Visa and Hanil Chemical

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

Diversification Opportunities for Visa and Hanil Chemical

-0.76

Correlation Coefficient

Visa  Hanil Chemical

Pay attention - limited upside

The 3 months correlation between Visa and Hanil is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hanil Chemical Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Chemical Ind 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 Hanil Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Chemical Ind has no effect on the direction of Visa i.e., Visa and Hanil Chemical go up and down completely randomly.

Pair Corralation between Visa and Hanil Chemical

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.62 times more return on investment than Hanil Chemical. However, Visa Class A is 1.6 times less risky than Hanil Chemical. It trades about 0.12 of its potential returns per unit of risk. Hanil Chemical Ind is currently generating about -0.03 per unit of risk. If you would invest  28,808  in Visa Class A on September 22, 2024 and sell it today you would earn a total of  2,963  from holding Visa Class A or generate 10.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Visa Class A  vs.  Hanil Chemical Ind

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hanil Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanil Chemical Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanil Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Hanil Chemical

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

The idea behind Visa Class A and Hanil Chemical Ind 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.