Correlation Between Qudian and Visa

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

Diversification Opportunities for Qudian and Visa

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Qudian and Visa is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Qudian Inc and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Qudian 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 Qudian Inc are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Qudian i.e., Qudian and Visa go up and down completely randomly.

Pair Corralation between Qudian and Visa

Allowing for the 90-day total investment horizon Qudian Inc is expected to under-perform the Visa. In addition to that, Qudian is 2.41 times more volatile than Visa Class A. It trades about -0.25 of its total potential returns per unit of risk. Visa Class A is currently generating about -0.38 per unit of volatility. If you would invest  28,928  in Visa Class A on January 20, 2024 and sell it today you would lose (1,791) from holding Visa Class A or give up 6.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Qudian Inc  vs.  Visa Class A

 Performance 
       Timeline  
Qudian Inc 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Qudian exhibited solid returns over the last few months and may actually be approaching a breakup point.
Visa Class A 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Qudian and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Qudian and Visa

The main advantage of trading using opposite Qudian and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qudian position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.
The idea behind Qudian Inc and Visa Class A 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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