Correlation Between Baron Capital and Visa

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

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

Diversification Opportunities for Baron Capital and Visa

-0.17

Correlation Coefficient

Baron Capital  Visa

Good diversification

The 3 months correlation between Baron and Visa is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Baron Capital 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 Baron Capital 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 Baron Capital 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 Baron Capital i.e., Baron Capital and Visa go up and down completely randomly.

Pair Corralation between Baron Capital and Visa

Given the investment horizon of 90 days Baron Capital is expected to under-perform the Visa. In addition to that, Baron Capital is 12.74 times more volatile than Visa Class A. It trades about -0.21 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.33 per unit of volatility. If you would invest  34,247  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  2,024  from holding Visa Class A or generate 5.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Baron Capital  vs.  Visa Class A

Baron Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Baron Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baron Capital and Visa

The main advantage of trading using opposite Baron Capital and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Capital 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 Baron Capital 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.