Correlation Between Visa and CBAK Energy

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

Diversification Opportunities for Visa and CBAK Energy

0.08

Correlation Coefficient

Visa  CBAK Energy

Significant diversification

The 3 months correlation between Visa and CBAK is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CBAK Energy Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBAK Energy Technology 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 CBAK Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBAK Energy Technology has no effect on the direction of Visa i.e., Visa and CBAK Energy go up and down completely randomly.

Pair Corralation between Visa and CBAK Energy

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the CBAK Energy. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.86 times less risky than CBAK Energy. The stock trades about -0.02 of its potential returns per unit of risk. The CBAK Energy Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  81.00  in CBAK Energy Technology on May 5, 2025 and sell it today you would earn a total of  9.00  from holding CBAK Energy Technology or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  CBAK Energy Technology

Visa Class A

Risk-Adjusted Performance

Very Weak

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

CBAK Energy Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CBAK Energy Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CBAK Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and CBAK Energy

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

The idea behind Visa Class A and CBAK Energy Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.