Correlation Between Visa and GT Capital

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

Diversification Opportunities for Visa and GT Capital

0.77

Correlation Coefficient

Visa  GT Capital

Poor diversification

The 3 months correlation between Visa and GTPPB is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings 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 GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Visa i.e., Visa and GT Capital go up and down completely randomly.

Pair Corralation between Visa and GT Capital

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.6 times more return on investment than GT Capital. However, Visa Class A is 1.65 times less risky than GT Capital. It trades about 0.1 of its potential returns per unit of risk. GT Capital Holdings is currently generating about 0.03 per unit of risk. If you would invest  29,100  in Visa Class A on September 17, 2024 and sell it today you would earn a total of  2,374  from holding Visa Class A or generate 8.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	42.19%
Values	Daily Returns

Visa Class A  vs.  GT Capital Holdings

Visa Class A

Risk-Adjusted Performance

8 of 100

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GT Capital Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GT Capital Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, GT Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Visa and GT Capital

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

The idea behind Visa Class A and GT Capital Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.