Correlation Between Visa and Horizon Securities

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

Diversification Opportunities for Visa and Horizon Securities

-0.2

Correlation Coefficient

Visa  Horizon Securities

Good diversification

The 3 months correlation between Visa and Horizon is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Horizon Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Securities 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 Horizon Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Securities has no effect on the direction of Visa i.e., Visa and Horizon Securities go up and down completely randomly.

Pair Corralation between Visa and Horizon Securities

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.57 times more return on investment than Horizon Securities. However, Visa Class A is 1.76 times less risky than Horizon Securities. It trades about 0.08 of its potential returns per unit of risk. Horizon Securities Co is currently generating about 0.03 per unit of risk. If you would invest  22,590  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  9,475  from holding Visa Class A or generate 41.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.11%
Values	Daily Returns

Visa Class A  vs.  Horizon Securities Co

Visa Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

Horizon Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Visa and Horizon Securities

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

The idea behind Visa Class A and Horizon Securities 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.