Correlation Between Visa and AXIS Capital

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

Diversification Opportunities for Visa and AXIS Capital

-0.25

Correlation Coefficient

Visa  AXIS Capital

Very good diversification

The 3 months correlation between Visa and AXIS is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AXIS Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXIS Capital Holdings 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 AXIS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXIS Capital Holdings has no effect on the direction of Visa i.e., Visa and AXIS Capital go up and down completely randomly.

Pair Corralation between Visa and AXIS Capital

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.83 times more return on investment than AXIS Capital. However, Visa Class A is 1.21 times less risky than AXIS Capital. It trades about 0.25 of its potential returns per unit of risk. AXIS Capital Holdings is currently generating about -0.07 per unit of risk. If you would invest  31,612  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  4,659  from holding Visa Class A or generate 14.74% 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.  AXIS Capital Holdings

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 19 (%) 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.

AXIS Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days AXIS Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AXIS Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and AXIS Capital

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

The idea behind Visa Class A and AXIS Capital Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.