Correlation Between Visa and Gafisa SA

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

Diversification Opportunities for Visa and Gafisa SA

-0.7

Correlation Coefficient

Visa  Gafisa SA

Excellent diversification

The 3 months correlation between Visa and Gafisa is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA 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 Gafisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gafisa SA has no effect on the direction of Visa i.e., Visa and Gafisa SA go up and down completely randomly.

Pair Corralation between Visa and Gafisa SA

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.17 times more return on investment than Gafisa SA. However, Visa Class A is 5.88 times less risky than Gafisa SA. It trades about 0.1 of its potential returns per unit of risk. Gafisa SA is currently generating about -0.04 per unit of risk. If you would invest  22,047  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  9,461  from holding Visa Class A or generate 42.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.47%
Values	Daily Returns

Visa Class A  vs.  Gafisa SA

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Gafisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gafisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Visa and Gafisa SA

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

The idea behind Visa Class A and Gafisa SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.