Correlation Between Visa and First Fidelity

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

Diversification Opportunities for Visa and First Fidelity

-0.08

Correlation Coefficient

Visa  First Fidelity

Good diversification

The 3 months correlation between Visa and First is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and First Fidelity Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Fidelity Leasing 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 First Fidelity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Fidelity Leasing has no effect on the direction of Visa i.e., Visa and First Fidelity go up and down completely randomly.

Pair Corralation between Visa and First Fidelity

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.27 times more return on investment than First Fidelity. However, Visa Class A is 3.68 times less risky than First Fidelity. It trades about 0.05 of its potential returns per unit of risk. First Fidelity Leasing is currently generating about -0.02 per unit of risk. If you would invest  31,722  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  240.00  from holding Visa Class A or generate 0.76% return on investment over 90 days.

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

Visa Class A  vs.  First Fidelity Leasing

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

First Fidelity Leasing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Fidelity Leasing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First Fidelity sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and First Fidelity

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

The idea behind Visa Class A and First Fidelity Leasing 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.