Correlation Between Visa and A SPAC

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

Diversification Opportunities for Visa and A SPAC

-0.47

Correlation Coefficient

Visa  A SPAC

Very good diversification

The 3 months correlation between Visa and ASCB is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and A SPAC II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A SPAC II 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 A SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A SPAC II has no effect on the direction of Visa i.e., Visa and A SPAC go up and down completely randomly.

Pair Corralation between Visa and A SPAC

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.0 times more return on investment than A SPAC. However, Visa is 1.0 times more volatile than A SPAC II. It trades about 0.15 of its potential returns per unit of risk. A SPAC II is currently generating about -0.02 per unit of risk. If you would invest  26,375  in Visa Class A on September 21, 2024 and sell it today you would earn a total of  5,474  from holding Visa Class A or generate 20.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.07%
Values	Daily Returns

Visa Class A  vs.  A SPAC II

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.

A SPAC II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A SPAC II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, A SPAC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and A SPAC

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

The idea behind Visa Class A and A SPAC II 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.