Correlation Between Visa and Namhae Chemical

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

Diversification Opportunities for Visa and Namhae Chemical

-0.74

Correlation Coefficient

Visa  Namhae Chemical

Pay attention - limited upside

The 3 months correlation between Visa and Namhae is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical 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 Namhae Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhae Chemical has no effect on the direction of Visa i.e., Visa and Namhae Chemical go up and down completely randomly.

Pair Corralation between Visa and Namhae Chemical

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.76 times more return on investment than Namhae Chemical. However, Visa Class A is 1.31 times less risky than Namhae Chemical. It trades about 0.09 of its potential returns per unit of risk. Namhae Chemical is currently generating about -0.06 per unit of risk. If you would invest  22,198  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  9,225  from holding Visa Class A or generate 41.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.2%
Values	Daily Returns

Visa Class A  vs.  Namhae Chemical

Visa Class A

Risk-Adjusted Performance

8 of 100

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.

Namhae Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Namhae Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Namhae 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 Namhae Chemical

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

The idea behind Visa Class A and Namhae Chemical 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.