Correlation Between FS Credit and Visa

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

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

Diversification Opportunities for FS Credit and Visa

0.77

Correlation Coefficient

FS Credit  Visa

Poor diversification

The 3 months correlation between FSCO and Visa is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding FS Credit Opportunities 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 FS Credit 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 FS Credit Opportunities 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 FS Credit i.e., FS Credit and Visa go up and down completely randomly.

Pair Corralation between FS Credit and Visa

Given the investment horizon of 90 days FS Credit is expected to generate 1.81 times less return on investment than Visa. But when comparing it to its historical volatility, FS Credit Opportunities is 1.87 times less risky than Visa. It trades about 0.3 of its potential returns per unit of risk. Visa Class A is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  34,524  in Visa Class A on December 4, 2024 and sell it today you would earn a total of  1,658  from holding Visa Class A or generate 4.8% return on investment over 90 days.

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

FS Credit Opportunities  vs.  Visa Class A

FS Credit Opportunities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FS Credit Opportunities are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, FS Credit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 23 (%) 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 FS Credit and Visa

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

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.