Correlation Between Visa and Industrial Investment

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

Diversification Opportunities for Visa and Industrial Investment

-0.11

Correlation Coefficient

Visa  Industrial Investment

Good diversification

The 3 months correlation between Visa and Industrial is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment 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 Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Visa i.e., Visa and Industrial Investment go up and down completely randomly.

Pair Corralation between Visa and Industrial Investment

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.3 times more return on investment than Industrial Investment. However, Visa Class A is 3.31 times less risky than Industrial Investment. It trades about 0.13 of its potential returns per unit of risk. Industrial Investment Trust is currently generating about -0.22 per unit of risk. If you would invest  31,478  in Visa Class A on December 30, 2024 and sell it today you would earn a total of  2,807  from holding Visa Class A or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Visa Class A  vs.  Industrial Investment Trust

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 10 (%) 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.

Industrial Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Visa and Industrial Investment

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

The idea behind Visa Class A and Industrial Investment Trust 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.