Correlation Between Ready Capital and Visa

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

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

Diversification Opportunities for Ready Capital and Visa

0.56

Correlation Coefficient

Ready Capital  Visa

Very weak diversification

The 3 months correlation between Ready and Visa is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ready 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 Ready 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 Ready 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 Ready Capital i.e., Ready Capital and Visa go up and down completely randomly.

Pair Corralation between Ready Capital and Visa

Considering the 90-day investment horizon Ready Capital is expected to generate 0.33 times more return on investment than Visa. However, Ready Capital is 3.03 times less risky than Visa. It trades about -0.04 of its potential returns per unit of risk. Visa Class A is currently generating about -0.03 per unit of risk. If you would invest  2,450  in Ready Capital on September 19, 2024 and sell it today you would lose (7.00) from holding Ready Capital or give up 0.29% of portfolio value over 90 days.

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

Ready Capital  vs.  Visa Class A

Ready Capital

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ready Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Ready Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ready Capital and Visa

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

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .