Correlation Between Visa and Income Financial

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

Diversification Opportunities for Visa and Income Financial

0.82

Correlation Coefficient

Visa  Income Financial

Very poor diversification

The 3 months correlation between Visa and Income is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Income Financial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Financial Trust 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 Income Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Financial Trust has no effect on the direction of Visa i.e., Visa and Income Financial go up and down completely randomly.

Pair Corralation between Visa and Income Financial

Taking into account the 90-day investment horizon Visa is expected to generate 1.28 times less return on investment than Income Financial. In addition to that, Visa is 1.03 times more volatile than Income Financial Trust. It trades about 0.16 of its total potential returns per unit of risk. Income Financial Trust is currently generating about 0.21 per unit of volatility. If you would invest  766.00  in Income Financial Trust on August 31, 2024 and sell it today you would earn a total of  133.00  from holding Income Financial Trust or generate 17.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Income Financial Trust

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Income Financial Trust

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Income Financial Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Income Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Income Financial

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

The idea behind Visa Class A and Income Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..