Correlation Between Visa and Concord Medical

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

Diversification Opportunities for Visa and Concord Medical

-0.74

Correlation Coefficient

Visa  Concord Medical

Pay attention - limited upside

The 3 months correlation between Visa and Concord is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Concord Medical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concord Medical Services 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 Concord Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concord Medical Services has no effect on the direction of Visa i.e., Visa and Concord Medical go up and down completely randomly.

Pair Corralation between Visa and Concord Medical

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.15 times more return on investment than Concord Medical. However, Visa Class A is 6.58 times less risky than Concord Medical. It trades about 0.09 of its potential returns per unit of risk. Concord Medical Services is currently generating about -0.03 per unit of risk. If you would invest  21,823  in Visa Class A on January 24, 2024 and sell it today you would earn a total of  5,410  from holding Visa Class A or generate 24.79% return on investment over 90 days.

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

Visa Class A  vs.  Concord Medical Services

Visa Class A

Risk-Adjusted Performance

0 of 100

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.

Concord Medical Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concord Medical Services 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 fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Visa and Concord Medical

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

The idea behind Visa Class A and Concord Medical Services 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.