Correlation Between Visa and Alpha Pro

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

Diversification Opportunities for Visa and Alpha Pro

-0.26

Correlation Coefficient

Visa  Alpha Pro

Very good diversification

The 3 months correlation between Visa and Alpha is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech 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 Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Visa i.e., Visa and Alpha Pro go up and down completely randomly.

Pair Corralation between Visa and Alpha Pro

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.53 times more return on investment than Alpha Pro. However, Visa Class A is 1.88 times less risky than Alpha Pro. It trades about 0.08 of its potential returns per unit of risk. Alpha Pro Tech is currently generating about 0.0 per unit of risk. If you would invest  32,037  in Visa Class A on December 25, 2024 and sell it today you would earn a total of  1,529  from holding Visa Class A or generate 4.77% 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.  Alpha Pro Tech

Visa Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Alpha Pro Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Pro Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Pro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and Alpha Pro

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

The idea behind Visa Class A and Alpha Pro Tech 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.