Correlation Between Visa and Malacca Straits

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

Diversification Opportunities for Visa and Malacca Straits

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Visa and Malacca is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Malacca Straits Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malacca Straits Acqu 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 Malacca Straits. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malacca Straits Acqu has no effect on the direction of Visa i.e., Visa and Malacca Straits go up and down completely randomly.

Pair Corralation between Visa and Malacca Straits

If you would invest  27,883  in Visa Class A on September 6, 2024 and sell it today you would earn a total of  3,107  from holding Visa Class A or generate 11.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy1.59%
ValuesDaily Returns

Visa Class A  vs.  Malacca Straits Acquisition

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Malacca Straits Acqu 

Risk-Adjusted Performance

0 of 100

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

Visa and Malacca Straits Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Malacca Straits

The main advantage of trading using opposite Visa and Malacca Straits positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Malacca Straits 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 Malacca Straits will offset losses from the drop in Malacca Straits' long position.
The idea behind Visa Class A and Malacca Straits Acquisition 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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