Correlation Between Visa and AMP

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Can any of the company-specific risk be diversified away by investing in both Visa and AMP 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 AMP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Inc and AMP LIMITED, you can compare the effects of market volatilities on Visa and AMP 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 AMP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and AMP.

Diversification Opportunities for Visa and AMP

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Visa and AMP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and AMP LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMP LIMITED 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 Inc are associated (or correlated) with AMP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMP LIMITED has no effect on the direction of Visa i.e., Visa and AMP go up and down completely randomly.

Pair Corralation between Visa and AMP

Taking into account the 90-day investment horizon Visa Inc is expected to generate 0.06 times more return on investment than AMP. However, Visa Inc is 18.01 times less risky than AMP. It trades about 0.12 of its potential returns per unit of risk. AMP LIMITED is currently generating about -0.24 per unit of risk. If you would invest  20,684  in Visa Inc on May 19, 2022 and sell it today you would earn a total of  768.00  from holding Visa Inc or generate 3.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy73.91%
ValuesDaily Returns

Visa Inc  vs.  AMP LIMITED

 Performance (%) 
       Timeline  
Visa Inc 
Visa Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 6 (%) 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 September 2022.

Visa Price Channel

AMP LIMITED 
AMP Performance
0 of 100
Over the last 90 days AMP LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Visa and AMP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and AMP

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

AMP LIMITED

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against AMP as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. AMP's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, AMP's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to AMP LIMITED.
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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