Correlation Between Visa and HHG Capital

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

Diversification Opportunities for Visa and HHG Capital

-0.62

Correlation Coefficient

Visa  HHG Capital

Excellent diversification

The 3 months correlation between Visa and HHG is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and HHG Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HHG Capital 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 HHG Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HHG Capital has no effect on the direction of Visa i.e., Visa and HHG Capital go up and down completely randomly.

Pair Corralation between Visa and HHG Capital

If you would invest  28,630  in Visa Class A on August 21, 2024 and sell it today you would earn a total of  2,555  from holding Visa Class A or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Visa Class A  vs.  HHG Capital

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

HHG Capital

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days HHG Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain fundamental indicators, HHG Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and HHG Capital

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

The idea behind Visa Class A and HHG Capital 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.