Correlation Between Visa and BrightSpring Health

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

Diversification Opportunities for Visa and BrightSpring Health

0.7

Correlation Coefficient

Visa  BrightSpring Health

Poor diversification

The 3 months correlation between Visa and BrightSpring is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health 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 BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of Visa i.e., Visa and BrightSpring Health go up and down completely randomly.

Pair Corralation between Visa and BrightSpring Health

Taking into account the 90-day investment horizon Visa is expected to generate 22.74 times less return on investment than BrightSpring Health. But when comparing it to its historical volatility, Visa Class A is 3.79 times less risky than BrightSpring Health. It trades about 0.06 of its potential returns per unit of risk. BrightSpring Health Services, is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,744  in BrightSpring Health Services, on October 25, 2024 and sell it today you would earn a total of  408.00  from holding BrightSpring Health Services, or generate 23.39% 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.  BrightSpring Health Services,

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

BrightSpring Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, BrightSpring Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and BrightSpring Health

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

The idea behind Visa Class A and BrightSpring Health Services, 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.