Correlation Between Visa and Bravura Solutions

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

Diversification Opportunities for Visa and Bravura Solutions

0.59

Correlation Coefficient

Visa  Bravura Solutions

Very weak diversification

The 3 months correlation between Visa and Bravura is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Bravura Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravura Solutions 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 Bravura Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravura Solutions has no effect on the direction of Visa i.e., Visa and Bravura Solutions go up and down completely randomly.

Pair Corralation between Visa and Bravura Solutions

Taking into account the 90-day investment horizon Visa is expected to generate 3.11 times less return on investment than Bravura Solutions. But when comparing it to its historical volatility, Visa Class A is 3.34 times less risky than Bravura Solutions. It trades about 0.23 of its potential returns per unit of risk. Bravura Solutions is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Bravura Solutions on September 22, 2024 and sell it today you would earn a total of  60.00  from holding Bravura Solutions or generate 40.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.56%
Values	Daily Returns

Visa Class A  vs.  Bravura Solutions

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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.

Bravura Solutions

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravura Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravura Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Bravura Solutions

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

The idea behind Visa Class A and Bravura Solutions 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.