Correlation Between Visa and Vietnam Petroleum

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

Diversification Opportunities for Visa and Vietnam Petroleum

VisaVietnamDiversified AwayVisaVietnamDiversified Away100%
0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Visa and Vietnam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Vietnam Petroleum Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Petroleum 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 Vietnam Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Petroleum has no effect on the direction of Visa i.e., Visa and Vietnam Petroleum go up and down completely randomly.

Pair Corralation between Visa and Vietnam Petroleum

Taking into account the 90-day investment horizon Visa is expected to generate 1.48 times less return on investment than Vietnam Petroleum. But when comparing it to its historical volatility, Visa Class A is 1.3 times less risky than Vietnam Petroleum. It trades about 0.11 of its potential returns per unit of risk. Vietnam Petroleum Transport is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,270,000  in Vietnam Petroleum Transport on September 16, 2024 and sell it today you would earn a total of  165,000  from holding Vietnam Petroleum Transport or generate 12.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.48%
ValuesDaily Returns

Visa Class A  vs.  Vietnam Petroleum Transport

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -50510
JavaScript chart by amCharts 3.21.15V VIP
       Timeline  
Visa Class A 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec270280290300310
Vietnam Petroleum 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Petroleum Transport are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec12,50013,00013,50014,00014,50015,000

Visa and Vietnam Petroleum Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.88-2.91-1.93-0.960.01731.042.083.124.16 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15V VIP
       Returns  

Pair Trading with Visa and Vietnam Petroleum

The main advantage of trading using opposite Visa and Vietnam Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Vietnam Petroleum 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 Vietnam Petroleum will offset losses from the drop in Vietnam Petroleum's long position.
The idea behind Visa Class A and Vietnam Petroleum Transport 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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