Correlation Between Visa and Cognios Market

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

Diversification Opportunities for Visa and Cognios Market

-0.67

Correlation Coefficient

Visa  Cognios Market

Excellent diversification

The 3 months correlation between Visa and Cognios is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Cognios Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognios Market Neutral 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 Cognios Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognios Market Neutral has no effect on the direction of Visa i.e., Visa and Cognios Market go up and down completely randomly.

Pair Corralation between Visa and Cognios Market

Taking into account the 90-day investment horizon Visa Class A is expected to generate 14.98 times more return on investment than Cognios Market. However, Visa is 14.98 times more volatile than Cognios Market Neutral. It trades about 0.33 of its potential returns per unit of risk. Cognios Market Neutral is currently generating about -0.18 per unit of risk. If you would invest  28,960  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  2,510  from holding Visa Class A or generate 8.67% 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.  Cognios Market Neutral

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Cognios Market Neutral

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognios Market Neutral has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cognios Market 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 Cognios Market

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

The idea behind Visa Class A and Cognios Market Neutral 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.