Correlation Between Visa and CDSPI Canadian

Can any of the company-specific risk be diversified away by investing in both Visa and CDSPI Canadian 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 CDSPI Canadian 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 CDSPI Canadian Equity, you can compare the effects of market volatilities on Visa and CDSPI Canadian 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 CDSPI Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and CDSPI Canadian.

Diversification Opportunities for Visa and CDSPI Canadian

0.16

Correlation Coefficient

Visa  CDSPI Canadian

Average diversification

The 3 months correlation between Visa and CDSPI is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CDSPI Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDSPI Canadian Equity 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 CDSPI Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDSPI Canadian Equity has no effect on the direction of Visa i.e., Visa and CDSPI Canadian go up and down completely randomly.

Pair Corralation between Visa and CDSPI Canadian

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.79 times more return on investment than CDSPI Canadian. However, Visa is 1.79 times more volatile than CDSPI Canadian Equity. It trades about 0.18 of its potential returns per unit of risk. CDSPI Canadian Equity is currently generating about -0.03 per unit of risk. If you would invest  27,694  in Visa Class A on October 10, 2024 and sell it today you would earn a total of  3,473  from holding Visa Class A or generate 12.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Visa Class A  vs.  CDSPI Canadian Equity

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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 February 2025.

CDSPI Canadian Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDSPI Canadian Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, CDSPI Canadian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and CDSPI Canadian

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

The idea behind Visa Class A and CDSPI Canadian Equity 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.