Correlation Between Visa and Business Development

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

Diversification Opportunities for Visa and Business Development

0.44

Correlation Coefficient

Visa  Business Development

Very weak diversification

The 3 months correlation between Visa and Business is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Business Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business Development Corp 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 Business Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business Development Corp has no effect on the direction of Visa i.e., Visa and Business Development go up and down completely randomly.

Pair Corralation between Visa and Business Development

Taking into account the 90-day investment horizon Visa Class A is expected to generate 35.37 times more return on investment than Business Development. However, Visa is 35.37 times more volatile than Business Development Corp. It trades about 0.06 of its potential returns per unit of risk. Business Development Corp is currently generating about 0.22 per unit of risk. If you would invest  31,185  in Visa Class A on September 20, 2024 and sell it today you would earn a total of  303.00  from holding Visa Class A or generate 0.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Business Development Corp

Visa Class A

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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.

Business Development Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Business Development Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Business Development is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Business Development

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

The idea behind Visa Class A and Business Development 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.