Correlation Between Visa and Utilities Portfolio

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

Diversification Opportunities for Visa and Utilities Portfolio

0.43

Correlation Coefficient

Visa  Utilities Portfolio

Very weak diversification

The 3 months correlation between Visa and Utilities is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio 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 Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of Visa i.e., Visa and Utilities Portfolio go up and down completely randomly.

Pair Corralation between Visa and Utilities Portfolio

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.97 times more return on investment than Utilities Portfolio. However, Visa Class A is 1.03 times less risky than Utilities Portfolio. It trades about 0.15 of its potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.02 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  3,174  from holding Visa Class A or generate 9.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Utilities Portfolio Utilities

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 11 (%) 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.

Utilities Portfolio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Utilities Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Utilities Portfolio

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

The idea behind Visa Class A and Utilities Portfolio Utilities 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.