Correlation Between Visa and Eyebright Medical

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

Diversification Opportunities for Visa and Eyebright Medical

0.15

Correlation Coefficient

Visa  Eyebright Medical

Average diversification

The 3 months correlation between Visa and Eyebright is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Eyebright Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyebright Medical 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 Eyebright Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyebright Medical has no effect on the direction of Visa i.e., Visa and Eyebright Medical go up and down completely randomly.

Pair Corralation between Visa and Eyebright Medical

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.26 times more return on investment than Eyebright Medical. However, Visa Class A is 3.87 times less risky than Eyebright Medical. It trades about 0.23 of its potential returns per unit of risk. Eyebright Medical Technology is currently generating about 0.04 per unit of risk. If you would invest  27,464  in Visa Class A on September 27, 2024 and sell it today you would earn a total of  4,601  from holding Visa Class A or generate 16.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Visa Class A  vs.  Eyebright Medical Technology

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Eyebright Medical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eyebright Medical Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eyebright Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Eyebright Medical

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

The idea behind Visa Class A and Eyebright Medical Technology 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.