Correlation Between American Business and Visa

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

By analyzing existing cross correlation between American Business Corp and Visa Class A, you can compare the effects of market volatilities on American Business 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 American Business with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Business and Visa.

Diversification Opportunities for American Business and Visa

0.0

Correlation Coefficient

American Business  Visa

Pay attention - limited upside

The 3 months correlation between American and Visa is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Business Corp 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 American Business 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 American Business Corp 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 American Business i.e., American Business and Visa go up and down completely randomly.

Pair Corralation between American Business and Visa

If you would invest  27,809  in Visa Class A on September 5, 2024 and sell it today you would earn a total of  3,492  from holding Visa Class A or generate 12.56% return on investment over 90 days.

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

American Business Corp  vs.  Visa Class A

American Business Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Business Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, American Business is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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 January 2025.

Pair Trading with American Business and Visa

The main advantage of trading using opposite American Business and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Business 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 American Business Corp 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.