Correlation Between Visa and ASM Pacific

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

Diversification Opportunities for Visa and ASM Pacific

0.42

Correlation Coefficient

Visa  ASM Pacific

Very weak diversification

The 3 months correlation between Visa and ASM is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ASM Pacific Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM Pacific Technology 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 ASM Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM Pacific Technology has no effect on the direction of Visa i.e., Visa and ASM Pacific go up and down completely randomly.

Pair Corralation between Visa and ASM Pacific

If you would invest  27,707  in Visa Class A on October 1, 2024 and sell it today you would earn a total of  4,159  from holding Visa Class A or generate 15.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Visa Class A  vs.  ASM Pacific Technology

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

ASM Pacific Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASM Pacific Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASM Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and ASM Pacific

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

The idea behind Visa Class A and ASM Pacific 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.