Correlation Between Visa and MBANK

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

Diversification Opportunities for Visa and MBANK

-0.79

Correlation Coefficient

Visa  MBANK

Pay attention - limited upside

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

Pair Corralation between Visa and MBANK

Taking into account the 90-day investment horizon Visa is expected to generate 1.81 times less return on investment than MBANK. But when comparing it to its historical volatility, Visa Class A is 2.7 times less risky than MBANK. It trades about 0.08 of its potential returns per unit of risk. MBANK is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,805  in MBANK on September 29, 2024 and sell it today you would earn a total of  5,420  from holding MBANK or generate 79.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.61%
Values	Daily Returns

Visa Class A  vs.  MBANK

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

MBANK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MBANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Visa and MBANK

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

The idea behind Visa Class A and MBANK 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.