Correlation Between Visa and Catalyst Dynamic

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

Diversification Opportunities for Visa and Catalyst Dynamic

-0.3

Correlation Coefficient

Visa  Catalyst Dynamic

Very good diversification

The 3 months correlation between Visa and Catalyst is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Catalyst Dynamic Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Dynamic Alpha 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 Catalyst Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Dynamic Alpha has no effect on the direction of Visa i.e., Visa and Catalyst Dynamic go up and down completely randomly.

Pair Corralation between Visa and Catalyst Dynamic

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than Catalyst Dynamic. However, Visa Class A is 1.78 times less risky than Catalyst Dynamic. It trades about 0.25 of its potential returns per unit of risk. Catalyst Dynamic Alpha is currently generating about -0.15 per unit of risk. If you would invest  31,612  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  4,659  from holding Visa Class A or generate 14.74% 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.  Catalyst Dynamic Alpha

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 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.

Catalyst Dynamic Alpha

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalyst Dynamic Alpha has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Visa and Catalyst Dynamic

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

The idea behind Visa Class A and Catalyst Dynamic Alpha 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.