Correlation Between Visa and EJF Investments

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

Diversification Opportunities for Visa and EJF Investments

0.02

Correlation Coefficient

Visa  EJF Investments

Significant diversification

The 3 months correlation between Visa and EJF is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF Investments 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 EJF Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EJF Investments has no effect on the direction of Visa i.e., Visa and EJF Investments go up and down completely randomly.

Pair Corralation between Visa and EJF Investments

Taking into account the 90-day investment horizon Visa is expected to generate 1.04 times less return on investment than EJF Investments. But when comparing it to its historical volatility, Visa Class A is 1.87 times less risky than EJF Investments. It trades about 0.11 of its potential returns per unit of risk. EJF Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,635  in EJF Investments on December 19, 2024 and sell it today you would earn a total of  715.00  from holding EJF Investments or generate 6.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Visa Class A  vs.  EJF Investments

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.

EJF Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EJF Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EJF Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and EJF Investments

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

The idea behind Visa Class A and EJF Investments 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.