Correlation Between Visa and Visual Photonics

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

Diversification Opportunities for Visa and Visual Photonics

0.14

Correlation Coefficient

Visa  Visual Photonics

Average diversification

The 3 months correlation between Visa and Visual is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Visual Photonics Epitaxy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visual Photonics Epitaxy 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 Visual Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visual Photonics Epitaxy has no effect on the direction of Visa i.e., Visa and Visual Photonics go up and down completely randomly.

Pair Corralation between Visa and Visual Photonics

Taking into account the 90-day investment horizon Visa is expected to generate 1.78 times less return on investment than Visual Photonics. But when comparing it to its historical volatility, Visa Class A is 3.15 times less risky than Visual Photonics. It trades about 0.08 of its potential returns per unit of risk. Visual Photonics Epitaxy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,750  in Visual Photonics Epitaxy on September 12, 2024 and sell it today you would earn a total of  4,800  from holding Visual Photonics Epitaxy or generate 40.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.3%
Values	Daily Returns

Visa Class A  vs.  Visual Photonics Epitaxy

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

Visual Photonics Epitaxy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visual Photonics Epitaxy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Visual Photonics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Visual Photonics

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

The idea behind Visa Class A and Visual Photonics Epitaxy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .