Correlation Between Visa and Trane Technologies

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

Diversification Opportunities for Visa and Trane Technologies

-0.57

Correlation Coefficient

Visa  Trane Technologies

Excellent diversification

The 3 months correlation between Visa and Trane is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Visa i.e., Visa and Trane Technologies go up and down completely randomly.

Pair Corralation between Visa and Trane Technologies

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.62 times more return on investment than Trane Technologies. However, Visa Class A is 1.61 times less risky than Trane Technologies. It trades about 0.11 of its potential returns per unit of risk. Trane Technologies plc is currently generating about -0.15 per unit of risk. If you would invest  31,718  in Visa Class A on December 20, 2024 and sell it today you would earn a total of  2,269  from holding Visa Class A or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Visa Class A  vs.  Trane Technologies plc

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 9 (%) 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.

Trane Technologies plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trane Technologies plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Visa and Trane Technologies

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

The idea behind Visa Class A and Trane Technologies plc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.