Correlation Between Visa and Strategic Allocation

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

Diversification Opportunities for Visa and Strategic Allocation

-0.24

Correlation Coefficient

Visa  Strategic Allocation

Very good diversification

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

Pair Corralation between Visa and Strategic Allocation

If you would invest  25,318  in Visa Class A on October 22, 2024 and sell it today you would earn a total of  6,644  from holding Visa Class A or generate 26.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Visa Class A  vs.  Strategic Allocation Servative

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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 February 2025.

Strategic Allocation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Allocation Servative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Strategic Allocation 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 Strategic Allocation

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

The idea behind Visa Class A and Strategic Allocation Servative 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.