Correlation Between Visa and KPX Green

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

Diversification Opportunities for Visa and KPX Green

-0.78

Correlation Coefficient

Visa  KPX Green

Pay attention - limited upside

The 3 months correlation between Visa and KPX is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and KPX Green Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Green 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 KPX Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Green Chemical has no effect on the direction of Visa i.e., Visa and KPX Green go up and down completely randomly.

Pair Corralation between Visa and KPX Green

Taking into account the 90-day investment horizon Visa is expected to generate 11.72 times less return on investment than KPX Green. But when comparing it to its historical volatility, Visa Class A is 5.57 times less risky than KPX Green. It trades about 0.13 of its potential returns per unit of risk. KPX Green Chemical is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  481,000  in KPX Green Chemical on September 23, 2024 and sell it today you would earn a total of  159,000  from holding KPX Green Chemical or generate 33.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  KPX Green Chemical

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.

KPX Green Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KPX Green Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KPX Green 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 KPX Green

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

The idea behind Visa Class A and KPX Green 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.