Correlation Between Visa and Cabot

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

Diversification Opportunities for Visa and Cabot

-0.64

Correlation Coefficient

Visa  Cabot

Excellent diversification

The 3 months correlation between Visa and Cabot is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot 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 Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Visa i.e., Visa and Cabot go up and down completely randomly.

Pair Corralation between Visa and Cabot

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.52 times more return on investment than Cabot. However, Visa Class A is 1.91 times less risky than Cabot. It trades about 0.1 of its potential returns per unit of risk. Cabot is currently generating about 0.02 per unit of risk. If you would invest  21,505  in Visa Class A on November 20, 2024 and sell it today you would earn a total of  13,876  from holding Visa Class A or generate 64.52% return on investment over 90 days.

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

Visa Class A  vs.  Cabot

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 21 (%) 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.

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Visa and Cabot

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

The idea behind Visa Class A and Cabot 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.