Correlation Between Visa and Elfun International

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

Diversification Opportunities for Visa and Elfun International

0.39

Correlation Coefficient

Visa  Elfun International

Weak diversification

The 3 months correlation between Visa and Elfun is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Elfun International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun International 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 Elfun International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun International has no effect on the direction of Visa i.e., Visa and Elfun International go up and down completely randomly.

Pair Corralation between Visa and Elfun International

Taking into account the 90-day investment horizon Visa is expected to generate 1.56 times less return on investment than Elfun International. In addition to that, Visa is 1.26 times more volatile than Elfun International Equity. It trades about 0.1 of its total potential returns per unit of risk. Elfun International Equity is currently generating about 0.19 per unit of volatility. If you would invest  2,502  in Elfun International Equity on December 4, 2024 and sell it today you would earn a total of  82.00  from holding Elfun International Equity or generate 3.28% return on investment over 90 days.

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

Visa Class A  vs.  Elfun International Equity

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

Elfun International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elfun International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Elfun International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Elfun International

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

The idea behind Visa Class A and Elfun International Equity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.