Correlation Between Visa and Edgepoint Global

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

Diversification Opportunities for Visa and Edgepoint Global

0.55

Correlation Coefficient

Visa  Edgepoint Global

Very weak diversification

The 3 months correlation between Visa and Edgepoint is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Edgepoint Global Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgepoint Global Por 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 Edgepoint Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgepoint Global Por has no effect on the direction of Visa i.e., Visa and Edgepoint Global go up and down completely randomly.

Pair Corralation between Visa and Edgepoint Global

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.65 times more return on investment than Edgepoint Global. However, Visa is 1.65 times more volatile than Edgepoint Global Portfolio. It trades about 0.11 of its potential returns per unit of risk. Edgepoint Global Portfolio is currently generating about 0.09 per unit of risk. If you would invest  26,932  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  4,576  from holding Visa Class A or generate 16.99% return on investment over 90 days.

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

Visa Class A  vs.  Edgepoint Global Portfolio

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.

Edgepoint Global Por

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edgepoint Global Portfolio are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong forward indicators, Edgepoint Global is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Visa and Edgepoint Global

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

The idea behind Visa Class A and Edgepoint Global Portfolio 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.