Correlation Between Visa and Corteva

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

Diversification Opportunities for Visa and Corteva

0.43

Correlation Coefficient

Visa  Corteva

Very weak diversification

The 3 months correlation between Visa and Corteva is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Corteva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corteva 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 Corteva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corteva has no effect on the direction of Visa i.e., Visa and Corteva go up and down completely randomly.

Pair Corralation between Visa and Corteva

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.81 times more return on investment than Corteva. However, Visa Class A is 1.23 times less risky than Corteva. It trades about 0.16 of its potential returns per unit of risk. Corteva is currently generating about 0.12 per unit of risk. If you would invest  27,801  in Visa Class A on September 1, 2024 and sell it today you would earn a total of  3,707  from holding Visa Class A or generate 13.33% return on investment over 90 days.

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

Visa Class A  vs.  Corteva

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.

Corteva

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corteva are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Corteva may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Visa and Corteva

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

The idea behind Visa Class A and Corteva 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.