Correlation Between Visa and Absa Multi

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

Diversification Opportunities for Visa and Absa Multi

0.65

Correlation Coefficient

Visa  Absa Multi

Poor diversification

The 3 months correlation between Visa and Absa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Absa Multi Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Multi Managed 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 Absa Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Multi Managed has no effect on the direction of Visa i.e., Visa and Absa Multi go up and down completely randomly.

Pair Corralation between Visa and Absa Multi

Taking into account the 90-day investment horizon Visa Class A is expected to generate 3.94 times more return on investment than Absa Multi. However, Visa is 3.94 times more volatile than Absa Multi Managed. It trades about 0.1 of its potential returns per unit of risk. Absa Multi Managed is currently generating about 0.19 per unit of risk. If you would invest  27,011  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  4,463  from holding Visa Class A or generate 16.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Absa Multi Managed

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Absa Multi Managed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Multi Managed are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively steady basic indicators, Absa Multi is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Visa and Absa Multi

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

The idea behind Visa Class A and Absa Multi Managed 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.