Correlation Between Visa and Ab Discovery

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

Diversification Opportunities for Visa and Ab Discovery

0.27

Correlation Coefficient

Visa  Ab Discovery

Modest diversification

The 3 months correlation between Visa and ABASX is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Ab Discovery Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Discovery Value 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 Ab Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Discovery Value has no effect on the direction of Visa i.e., Visa and Ab Discovery go up and down completely randomly.

Pair Corralation between Visa and Ab Discovery

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.78 times more return on investment than Ab Discovery. However, Visa Class A is 1.28 times less risky than Ab Discovery. It trades about 0.09 of its potential returns per unit of risk. Ab Discovery Value is currently generating about 0.01 per unit of risk. If you would invest  20,419  in Visa Class A on September 21, 2024 and sell it today you would earn a total of  11,069  from holding Visa Class A or generate 54.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Visa Class A  vs.  Ab Discovery Value

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ab Discovery Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Discovery Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Visa and Ab Discovery

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

The idea behind Visa Class A and Ab Discovery Value 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.