Correlation Between Visa and Desjardins

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

Diversification Opportunities for Visa and Desjardins

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Visa and Desjardins is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Desjardins RI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Emerging 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 Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Emerging has no effect on the direction of Visa i.e., Visa and Desjardins go up and down completely randomly.

Pair Corralation between Visa and Desjardins

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.35 times more return on investment than Desjardins. However, Visa is 1.35 times more volatile than Desjardins RI Emerging. It trades about 0.12 of its potential returns per unit of risk. Desjardins RI Emerging is currently generating about 0.06 per unit of risk. If you would invest  28,680  in Visa Class A on September 13, 2024 and sell it today you would earn a total of  2,699  from holding Visa Class A or generate 9.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Visa Class A  vs.  Desjardins RI Emerging

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
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 January 2025.
Desjardins RI Emerging 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Emerging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Visa and Desjardins Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Desjardins

The main advantage of trading using opposite Visa and Desjardins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Desjardins 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 Desjardins will offset losses from the drop in Desjardins' long position.
The idea behind Visa Class A and Desjardins RI Emerging 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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