Correlation Between Visa and Direxion Shares

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

Diversification Opportunities for Visa and Direxion Shares

-0.65

Correlation Coefficient

Visa  Direxion Shares

Excellent diversification

The 3 months correlation between Visa and Direxion is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of Visa i.e., Visa and Direxion Shares go up and down completely randomly.

Pair Corralation between Visa and Direxion Shares

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.31 times more return on investment than Direxion Shares. However, Visa Class A is 3.19 times less risky than Direxion Shares. It trades about 0.11 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about -0.09 per unit of risk. If you would invest  31,435  in Visa Class A on December 19, 2024 and sell it today you would earn a total of  2,042  from holding Visa Class A or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Direxion Shares ETF

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.

Direxion Shares ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Shares ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Visa and Direxion Shares

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

The idea behind Visa Class A and Direxion Shares ETF 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.