Correlation Between Visa and Global Tech

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

Diversification Opportunities for Visa and Global Tech

0.44

Correlation Coefficient

Visa  Global Tech

Very weak diversification

The 3 months correlation between Visa and Global is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Global Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Tech Industries 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 Global Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Tech Industries has no effect on the direction of Visa i.e., Visa and Global Tech go up and down completely randomly.

Pair Corralation between Visa and Global Tech

Taking into account the 90-day investment horizon Visa is expected to generate 97.59 times less return on investment than Global Tech. But when comparing it to its historical volatility, Visa Class A is 45.19 times less risky than Global Tech. It trades about 0.11 of its potential returns per unit of risk. Global Tech Industries is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Global Tech Industries on December 26, 2024 and sell it today you would earn a total of  14.00  from holding Global Tech Industries or generate 700.0% return on investment over 90 days.

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

Visa Class A  vs.  Global Tech Industries

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 8 (%) 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.

Global Tech Industries

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Tech Industries are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Global Tech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Global Tech

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

The idea behind Visa Class A and Global Tech Industries 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.