Correlation Between Visa and Thunder Software

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

Diversification Opportunities for Visa and Thunder Software

0.21

Correlation Coefficient

Visa  Thunder Software

Modest diversification

The 3 months correlation between Visa and Thunder is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Thunder Software Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Software Tec 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 Thunder Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Software Tec has no effect on the direction of Visa i.e., Visa and Thunder Software go up and down completely randomly.

Pair Corralation between Visa and Thunder Software

Taking into account the 90-day investment horizon Visa is expected to generate 1.35 times less return on investment than Thunder Software. But when comparing it to its historical volatility, Visa Class A is 3.83 times less risky than Thunder Software. It trades about 0.13 of its potential returns per unit of risk. Thunder Software Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,657  in Thunder Software Technology on October 8, 2024 and sell it today you would earn a total of  625.00  from holding Thunder Software Technology or generate 13.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.8%
Values	Daily Returns

Visa Class A  vs.  Thunder Software Technology

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

Thunder Software Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thunder Software Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Visa and Thunder Software

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

The idea behind Visa Class A and Thunder Software Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.