Correlation Between Visa and Intel

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

Diversification Opportunities for Visa and Intel

0.21

Correlation Coefficient

Visa  Intel

Modest diversification

The 3 months correlation between Visa and Intel is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Visa i.e., Visa and Intel go up and down completely randomly.

Pair Corralation between Visa and Intel

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.34 times more return on investment than Intel. However, Visa Class A is 2.97 times less risky than Intel. It trades about 0.24 of its potential returns per unit of risk. Intel is currently generating about -0.04 per unit of risk. If you would invest  28,322  in Visa Class A on September 23, 2024 and sell it today you would earn a total of  3,449  from holding Visa Class A or generate 12.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

Visa Class A  vs.  Intel

Visa Class A

Risk-Adjusted Performance

9 of 100

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Intel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and Intel

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

The idea behind Visa Class A and Intel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.