Correlation Between Bancroft Fund and Visa

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

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

Diversification Opportunities for Bancroft Fund and Visa

0.84

Correlation Coefficient

Bancroft Fund  Visa

Very poor diversification

The 3 months correlation between Bancroft and Visa is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bancroft Fund Limited 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 Bancroft Fund 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 Bancroft Fund Limited 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 Bancroft Fund i.e., Bancroft Fund and Visa go up and down completely randomly.

Pair Corralation between Bancroft Fund and Visa

Considering the 90-day investment horizon Bancroft Fund is expected to generate 1.55 times less return on investment than Visa. In addition to that, Bancroft Fund is 1.26 times more volatile than Visa Class A. It trades about 0.04 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.08 per unit of volatility. If you would invest  21,003  in Visa Class A on September 4, 2024 and sell it today you would earn a total of  10,298  from holding Visa Class A or generate 49.03% return on investment over 90 days.

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

Bancroft Fund Limited  vs.  Visa Class A

Bancroft Fund Limited

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bancroft Fund Limited are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Bancroft Fund showed solid returns over the last few months and may actually be approaching a breakup point.

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 Bancroft Fund and Visa

The main advantage of trading using opposite Bancroft Fund and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancroft Fund 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 Bancroft Fund Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.