Correlation Between Visa and Masco

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

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

Diversification Opportunities for Visa and Masco

0.89

Correlation Coefficient

Visa  Masco

Very poor diversification

The 3 months correlation between Visa and Masco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and Visa 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 Visa Inc are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Visa i.e., Visa and Masco go up and down completely randomly.

Pair Corralation between Visa and Masco

Given the investment horizon of 90 days Visa Inc is expected to generate 23.16 times more return on investment than Masco. However, Visa is 23.16 times more volatile than Masco. It trades about 0.14 of its potential returns per unit of risk. Masco is currently generating about 0.13 per unit of risk. If you would invest  500,624  in Visa Inc on September 23, 2024 and sell it today you would earn a total of  137,876  from holding Visa Inc or generate 27.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

Visa Inc  vs.  Masco

Visa Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Masco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Masco is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Masco

The main advantage of trading using opposite Visa and Masco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Masco 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 Masco will offset losses from the drop in Masco's long position.

The idea behind Visa Inc and Masco 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.