Correlation Between Visa and Calvert Smallcap

Can any of the company-specific risk be diversified away by investing in both Visa and Calvert Smallcap 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 Calvert Smallcap 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 Calvert Smallcap Fund6, you can compare the effects of market volatilities on Visa and Calvert Smallcap 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 Calvert Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Calvert Smallcap.

Diversification Opportunities for Visa and Calvert Smallcap

0.76

Correlation Coefficient

Visa  Calvert Smallcap

Poor diversification

The 3 months correlation between Visa and Calvert is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Calvert Smallcap Fund6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Smallcap Fund6 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 Calvert Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Smallcap Fund6 has no effect on the direction of Visa i.e., Visa and Calvert Smallcap go up and down completely randomly.

Pair Corralation between Visa and Calvert Smallcap

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.0 times more return on investment than Calvert Smallcap. However, Visa Class A is 1.0 times less risky than Calvert Smallcap. It trades about 0.09 of its potential returns per unit of risk. Calvert Smallcap Fund6 is currently generating about 0.05 per unit of risk. If you would invest  20,785  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  11,280  from holding Visa Class A or generate 54.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Visa Class A  vs.  Calvert Smallcap Fund6

Visa Class A

Risk-Adjusted Performance

19 of 100

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.

Calvert Smallcap Fund6

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Smallcap Fund6 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calvert Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Calvert Smallcap

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

The idea behind Visa Class A and Calvert Smallcap Fund6 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.