Correlation Between CITY OFFICE and Visa

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

By analyzing existing cross correlation between CITY OFFICE REIT and Visa Inc, you can compare the effects of market volatilities on CITY OFFICE 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 CITY OFFICE with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and Visa.

Diversification Opportunities for CITY OFFICE and Visa

-0.25

Correlation Coefficient

CITY OFFICE  Visa

Very good diversification

The 3 months correlation between CITY and Visa is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and CITY OFFICE 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 CITY OFFICE REIT 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 Inc has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Visa go up and down completely randomly.

Pair Corralation between CITY OFFICE and Visa

Assuming the 90 days horizon CITY OFFICE REIT is expected to under-perform the Visa. In addition to that, CITY OFFICE is 1.78 times more volatile than Visa Inc. It trades about -0.03 of its total potential returns per unit of risk. Visa Inc is currently generating about 0.04 per unit of volatility. If you would invest  30,499  in Visa Inc on December 20, 2024 and sell it today you would earn a total of  896.00  from holding Visa Inc or generate 2.94% return on investment over 90 days.

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

CITY OFFICE REIT  vs.  Visa Inc

CITY OFFICE REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITY OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CITY OFFICE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Visa Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CITY OFFICE and Visa

The main advantage of trading using opposite CITY OFFICE and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE 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 CITY OFFICE REIT and Visa Inc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.