Correlation Between Great Elm and Visa

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

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

Diversification Opportunities for Great Elm and Visa

0.55

Correlation Coefficient

Great Elm  Visa

Very weak diversification

The 3 months correlation between Great and Visa is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Group 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 Great Elm 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 Great Elm Group 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 Great Elm i.e., Great Elm and Visa go up and down completely randomly.

Pair Corralation between Great Elm and Visa

Assuming the 90 days horizon Great Elm Group is expected to under-perform the Visa. In addition to that, Great Elm is 1.13 times more volatile than Visa Class A. It trades about -0.09 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.0 per unit of volatility. If you would invest  31,665  in Visa Class A on October 3, 2024 and sell it today you would lose (61.00) from holding Visa Class A or give up 0.19% of portfolio value over 90 days.

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

Great Elm Group  vs.  Visa Class A

Great Elm Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Elm Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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 Great Elm and Visa

The main advantage of trading using opposite Great Elm and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm 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 Great Elm Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.