Correlation Between Visa and Apple

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

Diversification Opportunities for Visa and Apple

-0.8

Correlation Coefficient

Visa  Apple

Pay attention - limited upside

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

Pair Corralation between Visa and Apple

Taking into account the 90-day investment horizon Visa is expected to generate 1.41 times less return on investment than Apple. But when comparing it to its historical volatility, Visa Class A is 1.51 times less risky than Apple. It trades about 0.1 of its potential returns per unit of risk. Apple Inc DRC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,302,500  in Apple Inc DRC on September 14, 2024 and sell it today you would earn a total of  27,500  from holding Apple Inc DRC or generate 2.11% return on investment over 90 days.

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

Visa Class A  vs.  Apple Inc DRC

Visa Class A

Risk-Adjusted Performance

8 of 100

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 January 2025.

Apple Inc DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Apple is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Apple

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

The idea behind Visa Class A and Apple Inc DRC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.