Correlation Between Visa and Invesco DB

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

Diversification Opportunities for Visa and Invesco DB

0.44

Correlation Coefficient

Visa  Invesco DB

Very weak diversification

The 3 months correlation between Visa and Invesco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Invesco DB Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Base 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 Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Base has no effect on the direction of Visa i.e., Visa and Invesco DB go up and down completely randomly.

Pair Corralation between Visa and Invesco DB

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.46 times more return on investment than Invesco DB. However, Visa is 1.46 times more volatile than Invesco DB Base. It trades about 0.11 of its potential returns per unit of risk. Invesco DB Base is currently generating about 0.07 per unit of risk. If you would invest  32,037  in Visa Class A on December 26, 2024 and sell it today you would earn a total of  2,381  from holding Visa Class A or generate 7.43% 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.  Invesco DB Base

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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.

Invesco DB Base

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Base are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Invesco DB

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

The idea behind Visa Class A and Invesco DB Base 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.