Correlation Between Visa and IShares Focused

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

Diversification Opportunities for Visa and IShares Focused

0.35

Correlation Coefficient

Visa  IShares Focused

Weak diversification

The 3 months correlation between Visa and IShares is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and iShares Focused Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Focused Value 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 IShares Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Focused Value has no effect on the direction of Visa i.e., Visa and IShares Focused go up and down completely randomly.

Pair Corralation between Visa and IShares Focused

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.11 times more return on investment than IShares Focused. However, Visa is 1.11 times more volatile than iShares Focused Value. It trades about 0.25 of its potential returns per unit of risk. iShares Focused Value is currently generating about -0.03 per unit of risk. If you would invest  31,612  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  4,659  from holding Visa Class A or generate 14.74% 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.  iShares Focused Value

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 19 (%) 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.

iShares Focused Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Focused Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Focused is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Visa and IShares Focused

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

The idea behind Visa Class A and iShares Focused Value 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.