Correlation Between Visa and Converge Technology

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

Diversification Opportunities for Visa and Converge Technology

0.8

Correlation Coefficient

Visa  Converge Technology

Very poor diversification

The 3 months correlation between Visa and Converge is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology 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 Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of Visa i.e., Visa and Converge Technology go up and down completely randomly.

Pair Corralation between Visa and Converge Technology

Taking into account the 90-day investment horizon Visa is expected to generate 10.96 times less return on investment than Converge Technology. But when comparing it to its historical volatility, Visa Class A is 14.4 times less risky than Converge Technology. It trades about 0.29 of its potential returns per unit of risk. Converge Technology Solutions is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  352.00  in Converge Technology Solutions on November 29, 2024 and sell it today you would earn a total of  192.00  from holding Converge Technology Solutions or generate 54.55% return on investment over 90 days.

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

Visa Class A  vs.  Converge Technology Solutions

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 16 (%) 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 March 2025.

Converge Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Converge Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Converge Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Converge Technology

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

The idea behind Visa Class A and Converge Technology Solutions 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.