Correlation Between Visa and EverQuote

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

Diversification Opportunities for Visa and EverQuote

0.65

Correlation Coefficient

Visa  EverQuote

Poor diversification

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

Pair Corralation between Visa and EverQuote

Taking into account the 90-day investment horizon Visa is expected to generate 9.08 times less return on investment than EverQuote. But when comparing it to its historical volatility, Visa Class A is 4.91 times less risky than EverQuote. It trades about 0.1 of its potential returns per unit of risk. EverQuote Class A is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,770  in EverQuote Class A on December 22, 2024 and sell it today you would earn a total of  1,101  from holding EverQuote Class A or generate 62.2% return on investment over 90 days.

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

Visa Class A  vs.  EverQuote Class A

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 7 (%) 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.

EverQuote Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EverQuote Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EverQuote reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and EverQuote

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

The idea behind Visa Class A and EverQuote Class A 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.