Correlation Between Visa and Adocia

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

Diversification Opportunities for Visa and Adocia

-0.45

Correlation Coefficient

Visa  Adocia

Very good diversification

The 3 months correlation between Visa and Adocia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Adocia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adocia 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 Adocia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adocia has no effect on the direction of Visa i.e., Visa and Adocia go up and down completely randomly.

Pair Corralation between Visa and Adocia

Taking into account the 90-day investment horizon Visa is expected to generate 1.97 times less return on investment than Adocia. But when comparing it to its historical volatility, Visa Class A is 5.36 times less risky than Adocia. It trades about 0.1 of its potential returns per unit of risk. Adocia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Adocia on November 20, 2024 and sell it today you would earn a total of  138.00  from holding Adocia or generate 39.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Visa Class A  vs.  Adocia

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 21 (%) 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.

Adocia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adocia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Visa and Adocia

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

The idea behind Visa Class A and Adocia 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.