Correlation Between Visa and SKC

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

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

Diversification Opportunities for Visa and SKC

-0.69

Correlation Coefficient

Visa  SKC

Excellent diversification

The 3 months correlation between Visa and SKC is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SKC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKC Co 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 Class A are associated (or correlated) with SKC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKC Co has no effect on the direction of Visa i.e., Visa and SKC go up and down completely randomly.

Pair Corralation between Visa and SKC

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.28 times more return on investment than SKC. However, Visa Class A is 3.63 times less risky than SKC. It trades about 0.09 of its potential returns per unit of risk. SKC Co is currently generating about 0.0 per unit of risk. If you would invest  27,110  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  4,398  from holding Visa Class A or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.58%
Values	Daily Returns

Visa Class A  vs.  SKC Co

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

SKC Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SKC Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Visa and SKC

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

The idea behind Visa Class A and SKC Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.