Correlation Between Visa and Value Equity

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

Diversification Opportunities for Visa and Value Equity

0.31

Correlation Coefficient

Visa  Value Equity

Weak diversification

The 3 months correlation between Visa and Value is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Value Equity Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Equity Institu 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 Value Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Equity Institu has no effect on the direction of Visa i.e., Visa and Value Equity go up and down completely randomly.

Pair Corralation between Visa and Value Equity

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.98 times more return on investment than Value Equity. However, Visa Class A is 1.02 times less risky than Value Equity. It trades about 0.11 of its potential returns per unit of risk. Value Equity Institutional is currently generating about -0.05 per unit of risk. If you would invest  28,992  in Visa Class A on September 16, 2024 and sell it today you would earn a total of  2,482  from holding Visa Class A or generate 8.56% 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.  Value Equity Institutional

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.

Value Equity Institu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Equity Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Value Equity 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 Value Equity

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

The idea behind Visa Class A and Value Equity Institutional 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.