Correlation Between Visa and CSIF III

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

Diversification Opportunities for Visa and CSIF III

0.8

Correlation Coefficient

Visa  CSIF III

Very poor diversification

The 3 months correlation between Visa and CSIF is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CSIF III Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSIF III Eq 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 CSIF III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSIF III Eq has no effect on the direction of Visa i.e., Visa and CSIF III go up and down completely randomly.

Pair Corralation between Visa and CSIF III

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.42 times more return on investment than CSIF III. However, Visa is 1.42 times more volatile than CSIF III Eq. It trades about 0.14 of its potential returns per unit of risk. CSIF III Eq is currently generating about -0.11 per unit of risk. If you would invest  31,182  in Visa Class A on September 27, 2024 and sell it today you would earn a total of  883.00  from holding Visa Class A or generate 2.83% return on investment over 90 days.

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

Visa Class A  vs.  CSIF III Eq

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

CSIF III Eq

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Eq are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, CSIF III is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and CSIF III

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

The idea behind Visa Class A and CSIF III Eq 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.