Correlation Between Visa and Cartica Acquisition

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

Diversification Opportunities for Visa and Cartica Acquisition

-0.15

Correlation Coefficient

Visa  Cartica Acquisition

Good diversification

The 3 months correlation between Visa and Cartica is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Cartica Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cartica Acquisition 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 Cartica Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cartica Acquisition Corp has no effect on the direction of Visa i.e., Visa and Cartica Acquisition go up and down completely randomly.

Pair Corralation between Visa and Cartica Acquisition

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.72 times more return on investment than Cartica Acquisition. However, Visa is 1.72 times more volatile than Cartica Acquisition Corp. It trades about 0.09 of its potential returns per unit of risk. Cartica Acquisition Corp is currently generating about 0.04 per unit of risk. If you would invest  20,190  in Visa Class A on September 12, 2024 and sell it today you would earn a total of  11,048  from holding Visa Class A or generate 54.72% return on investment over 90 days.

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

Visa Class A  vs.  Cartica Acquisition Corp

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 weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cartica Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cartica Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Cartica Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and Cartica Acquisition

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

The idea behind Visa Class A and Cartica Acquisition 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.