Correlation Between Visa and Polychem Indonesia

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

Diversification Opportunities for Visa and Polychem Indonesia

-0.79

Correlation Coefficient

Visa  Polychem Indonesia

Pay attention - limited upside

The 3 months correlation between Visa and Polychem is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Polychem Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polychem Indonesia Tbk 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 Polychem Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polychem Indonesia Tbk has no effect on the direction of Visa i.e., Visa and Polychem Indonesia go up and down completely randomly.

Pair Corralation between Visa and Polychem Indonesia

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.43 times more return on investment than Polychem Indonesia. However, Visa Class A is 2.35 times less risky than Polychem Indonesia. It trades about 0.09 of its potential returns per unit of risk. Polychem Indonesia Tbk is currently generating about -0.01 per unit of risk. If you would invest  20,311  in Visa Class A on September 16, 2024 and sell it today you would earn a total of  11,163  from holding Visa Class A or generate 54.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.56%
Values	Daily Returns

Visa Class A  vs.  Polychem Indonesia Tbk

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.

Polychem Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polychem Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Visa and Polychem Indonesia

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

The idea behind Visa Class A and Polychem Indonesia Tbk 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.