Correlation Between Visa and AlphaTime Acquisition

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

Diversification Opportunities for Visa and AlphaTime Acquisition

-0.41

Correlation Coefficient

Visa  AlphaTime Acquisition

Very good diversification

The 3 months correlation between Visa and AlphaTime is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AlphaTime Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaTime Acquisition 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 AlphaTime Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaTime Acquisition has no effect on the direction of Visa i.e., Visa and AlphaTime Acquisition go up and down completely randomly.

Pair Corralation between Visa and AlphaTime Acquisition

Taking into account the 90-day investment horizon Visa is expected to generate 18.06 times less return on investment than AlphaTime Acquisition. But when comparing it to its historical volatility, Visa Class A is 15.02 times less risky than AlphaTime Acquisition. It trades about 0.1 of its potential returns per unit of risk. AlphaTime Acquisition Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15.00  in AlphaTime Acquisition Corp on December 21, 2024 and sell it today you would earn a total of  4.00  from holding AlphaTime Acquisition Corp or generate 26.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.67%
Values	Daily Returns

Visa Class A  vs.  AlphaTime Acquisition Corp

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 7 (%) 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 April 2025.

AlphaTime Acquisition

Risk-Adjusted Performance

OK

Over the last 90 days AlphaTime Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak fundamental indicators, AlphaTime Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and AlphaTime Acquisition

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

The idea behind Visa Class A and AlphaTime Acquisition Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.