Correlation Between Visa and Ensign

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

Diversification Opportunities for Visa and Ensign

-0.28

Correlation Coefficient

Visa  Ensign

Very good diversification

The 3 months correlation between Visa and Ensign is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group 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 Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Visa i.e., Visa and Ensign go up and down completely randomly.

Pair Corralation between Visa and Ensign

Taking into account the 90-day investment horizon Visa is expected to generate 1.22 times less return on investment than Ensign. But when comparing it to its historical volatility, Visa Class A is 1.55 times less risky than Ensign. It trades about 0.08 of its potential returns per unit of risk. The Ensign Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,361  in The Ensign Group on October 27, 2024 and sell it today you would earn a total of  4,639  from holding The Ensign Group or generate 55.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.6%
Values	Daily Returns

Visa Class A  vs.  The Ensign Group

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Visa and Ensign

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

The idea behind Visa Class A and The Ensign Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.