Correlation Between OFS Capital and Visa

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

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

Diversification Opportunities for OFS Capital and Visa

-0.06

Correlation Coefficient

OFS Capital  Visa

Good diversification

The 3 months correlation between OFS and Visa is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding OFS Capital 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 OFS 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 OFS Capital 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 OFS Capital i.e., OFS Capital and Visa go up and down completely randomly.

Pair Corralation between OFS Capital and Visa

Considering the 90-day investment horizon OFS Capital is expected to generate 6.43 times less return on investment than Visa. In addition to that, OFS Capital is 1.03 times more volatile than Visa Class A. It trades about 0.02 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.11 per unit of volatility. If you would invest  28,992  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  2,482  from holding Visa Class A or generate 8.56% return on investment over 90 days.

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

OFS Capital Corp  vs.  Visa Class A

OFS Capital Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Capital Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, OFS Capital 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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 OFS Capital and Visa

The main advantage of trading using opposite OFS Capital and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFS 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 OFS Capital 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.