Correlation Between Visa and CONICO

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

Diversification Opportunities for Visa and CONICO

-0.07

Correlation Coefficient

Visa  CONICO

Good diversification

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

Pair Corralation between Visa and CONICO

Taking into account the 90-day investment horizon Visa is expected to generate 64.95 times less return on investment than CONICO. But when comparing it to its historical volatility, Visa Class A is 94.72 times less risky than CONICO. It trades about 0.23 of its potential returns per unit of risk. CONICO LTD is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.20  in CONICO LTD on September 26, 2024 and sell it today you would earn a total of  0.34  from holding CONICO LTD or generate 170.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  CONICO LTD

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.

CONICO LTD

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CONICO LTD are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CONICO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and CONICO

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

The idea behind Visa Class A and CONICO LTD 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.