Correlation Between Visa and China Kings

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

Diversification Opportunities for Visa and China Kings

0.07

Correlation Coefficient

Visa  China Kings

Significant diversification

The 3 months correlation between Visa and China is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and China Kings Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Kings Resources 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 China Kings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Kings Resources has no effect on the direction of Visa i.e., Visa and China Kings go up and down completely randomly.

Pair Corralation between Visa and China Kings

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.42 times more return on investment than China Kings. However, Visa Class A is 2.35 times less risky than China Kings. It trades about 0.28 of its potential returns per unit of risk. China Kings Resources is currently generating about -0.07 per unit of risk. If you would invest  29,129  in Visa Class A on September 5, 2024 and sell it today you would earn a total of  2,172  from holding Visa Class A or generate 7.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Visa Class A  vs.  China Kings Resources

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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.

China Kings Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Kings Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Kings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and China Kings

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

The idea behind Visa Class A and China Kings Resources 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.