Correlation Between Visa and Arcosa

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

Diversification Opportunities for Visa and Arcosa

0.94

Correlation Coefficient

Visa  Arcosa

Almost no diversification

The 3 months correlation between Visa and Arcosa is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Arcosa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcosa Inc 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 Arcosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcosa Inc has no effect on the direction of Visa i.e., Visa and Arcosa go up and down completely randomly.

Pair Corralation between Visa and Arcosa

Taking into account the 90-day investment horizon Visa is expected to generate 1.54 times less return on investment than Arcosa. But when comparing it to its historical volatility, Visa Class A is 2.01 times less risky than Arcosa. It trades about 0.09 of its potential returns per unit of risk. Arcosa Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,070  in Arcosa Inc on September 24, 2024 and sell it today you would earn a total of  4,430  from holding Arcosa Inc or generate 87.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.22%
Values	Daily Returns

Visa Class A  vs.  Arcosa Inc

Visa Class A

Risk-Adjusted Performance

17 of 100

OK

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.

Arcosa Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arcosa Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arcosa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Arcosa

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

The idea behind Visa Class A and Arcosa Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..