Correlation Between Visa and Inception Growth

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

Diversification Opportunities for Visa and Inception Growth

-0.13

Correlation Coefficient

Visa  Inception Growth

Good diversification

The 3 months correlation between Visa and Inception is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Inception Growth Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inception Growth Acq 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 Inception Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inception Growth Acq has no effect on the direction of Visa i.e., Visa and Inception Growth go up and down completely randomly.

Pair Corralation between Visa and Inception Growth

Taking into account the 90-day investment horizon Visa is expected to generate 32.65 times less return on investment than Inception Growth. But when comparing it to its historical volatility, Visa Class A is 6.48 times less risky than Inception Growth. It trades about 0.06 of its potential returns per unit of risk. Inception Growth Acquisition is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Inception Growth Acquisition on September 17, 2024 and sell it today you would earn a total of  1.50  from holding Inception Growth Acquisition or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Visa Class A  vs.  Inception Growth Acquisition

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.

Inception Growth Acq

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inception Growth Acquisition are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Inception Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Inception Growth

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

The idea behind Visa Class A and Inception Growth Acquisition 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.