Correlation Between Visa and Aspen Technology

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

Diversification Opportunities for Visa and Aspen Technology

0.76

Correlation Coefficient

Visa  Aspen Technology

Poor diversification

The 3 months correlation between Visa and Aspen is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Aspen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Technology 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 Aspen Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Technology has no effect on the direction of Visa i.e., Visa and Aspen Technology go up and down completely randomly.

Pair Corralation between Visa and Aspen Technology

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.49 times more return on investment than Aspen Technology. However, Visa is 1.49 times more volatile than Aspen Technology. It trades about 0.35 of its potential returns per unit of risk. Aspen Technology is currently generating about 0.38 per unit of risk. If you would invest  28,929  in Visa Class A on September 1, 2024 and sell it today you would earn a total of  2,579  from holding Visa Class A or generate 8.91% return on investment over 90 days.

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

Visa Class A  vs.  Aspen Technology

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Aspen Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aspen Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Visa and Aspen Technology

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

The idea behind Visa Class A and Aspen Technology 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.