Correlation Between Visa and Answer Technology

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

Diversification Opportunities for Visa and Answer Technology

-0.24

Correlation Coefficient

Visa  Answer Technology

Very good diversification

The 3 months correlation between Visa and Answer is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Answer Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Answer Technology 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 Answer Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Answer Technology has no effect on the direction of Visa i.e., Visa and Answer Technology go up and down completely randomly.

Pair Corralation between Visa and Answer Technology

Taking into account the 90-day investment horizon Visa is expected to generate 7.07 times less return on investment than Answer Technology. But when comparing it to its historical volatility, Visa Class A is 2.64 times less risky than Answer Technology. It trades about 0.11 of its potential returns per unit of risk. Answer Technology Co is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  5,110  in Answer Technology Co on December 26, 2024 and sell it today you would earn a total of  3,030  from holding Answer Technology Co or generate 59.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Visa Class A  vs.  Answer Technology Co

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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 April 2025.

Answer Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Answer Technology Co are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Answer Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Answer Technology

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

The idea behind Visa Class A and Answer Technology 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.