Correlation Between Visa and Sustainable Equity

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

Diversification Opportunities for Visa and Sustainable Equity

-0.03

Correlation Coefficient

Visa  Sustainable Equity

Good diversification

The 3 months correlation between Visa and Sustainable is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sustainable Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Equity 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 Sustainable Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sustainable Equity has no effect on the direction of Visa i.e., Visa and Sustainable Equity go up and down completely randomly.

Pair Corralation between Visa and Sustainable Equity

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.17 times more return on investment than Sustainable Equity. However, Visa is 1.17 times more volatile than Sustainable Equity Fund. It trades about 0.07 of its potential returns per unit of risk. Sustainable Equity Fund is currently generating about 0.07 per unit of risk. If you would invest  22,085  in Visa Class A on October 11, 2024 and sell it today you would earn a total of  9,175  from holding Visa Class A or generate 41.54% return on investment over 90 days.

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

Visa Class A  vs.  Sustainable Equity Fund

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 showed solid returns over the last few months and may actually be approaching a breakup point.

Sustainable Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Visa Class A and Sustainable Equity Fund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.