Correlation Between Visa and SHP ETF

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

Diversification Opportunities for Visa and SHP ETF

0.78

Correlation Coefficient

Visa  SHP ETF

Poor diversification

The 3 months correlation between Visa and SHP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of Visa i.e., Visa and SHP ETF go up and down completely randomly.

Pair Corralation between Visa and SHP ETF

Taking into account the 90-day investment horizon Visa Class A is expected to generate 19.1 times more return on investment than SHP ETF. However, Visa is 19.1 times more volatile than SHP ETF Trust. It trades about 0.12 of its potential returns per unit of risk. SHP ETF Trust is currently generating about 0.31 per unit of risk. If you would invest  32,037  in Visa Class A on December 25, 2024 and sell it today you would earn a total of  2,425  from holding Visa Class A or generate 7.57% return on investment over 90 days.

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

Visa Class A  vs.  SHP ETF Trust

Visa Class A

Risk-Adjusted Performance

Modest

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 April 2025.

SHP ETF Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SHP ETF Trust are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, SHP ETF is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Visa and SHP ETF

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

The idea behind Visa Class A and SHP ETF Trust 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.