Correlation Between Visa and HCM Acquisition

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

Diversification Opportunities for Visa and HCM Acquisition

0.03

Correlation Coefficient

Visa  HCM Acquisition

Significant diversification

The 3 months correlation between Visa and HCM is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and HCM Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Acquisition Corp 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 HCM Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Acquisition Corp has no effect on the direction of Visa i.e., Visa and HCM Acquisition go up and down completely randomly.

Pair Corralation between Visa and HCM Acquisition

If you would invest  30,825  in Visa Class A on September 15, 2024 and sell it today you would earn a total of  649.00  from holding Visa Class A or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Visa Class A  vs.  HCM Acquisition Corp

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.

HCM Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCM Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, HCM Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Visa and HCM Acquisition

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

The idea behind Visa Class A and HCM Acquisition Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.