Correlation Between Visa and Royal Wins

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

Diversification Opportunities for Visa and Royal Wins

0.0

Correlation Coefficient

Visa  Royal Wins

Pay attention - limited upside

The 3 months correlation between Visa and Royal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Royal Wins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Wins 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 Royal Wins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Wins has no effect on the direction of Visa i.e., Visa and Royal Wins go up and down completely randomly.

Pair Corralation between Visa and Royal Wins

Taking into account the 90-day investment horizon Visa is expected to generate 17.85 times less return on investment than Royal Wins. But when comparing it to its historical volatility, Visa Class A is 24.54 times less risky than Royal Wins. It trades about 0.09 of its potential returns per unit of risk. Royal Wins is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Royal Wins on September 12, 2024 and sell it today you would lose (0.20) from holding Royal Wins or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

Visa Class A  vs.  Royal Wins

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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.

Royal Wins

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Wins has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Royal Wins 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 Royal Wins

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

The idea behind Visa Class A and Royal Wins 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.