Correlation Between Visa and CARSALES

Can any of the company-specific risk be diversified away by investing in both Visa and CARSALES 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 CARSALES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Inc and CARSALESCOM, you can compare the effects of market volatilities on Visa and CARSALES 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 CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and CARSALES.

Diversification Opportunities for Visa and CARSALES

0.3

Correlation Coefficient

Visa  CARSALES

Weak diversification

The 3 months correlation between Visa and CARSALES is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Visa i.e., Visa and CARSALES go up and down completely randomly.

Pair Corralation between Visa and CARSALES

Assuming the 90 days trading horizon Visa Inc is expected to generate 0.75 times more return on investment than CARSALES. However, Visa Inc is 1.34 times less risky than CARSALES. It trades about 0.05 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.1 per unit of risk. If you would invest  30,629  in Visa Inc on December 25, 2024 and sell it today you would earn a total of  1,166  from holding Visa Inc or generate 3.81% return on investment over 90 days.

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

Visa Inc  vs.  CARSALESCOM

Visa Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Visa is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CARSALESCOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Visa and CARSALES

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

The idea behind Visa Inc and CARSALESCOM 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.