Correlation Between Visa and Dividend Performers

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

Diversification Opportunities for Visa and Dividend Performers

0.22

Correlation Coefficient

Visa  Dividend Performers

Modest diversification

The 3 months correlation between Visa and Dividend is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Dividend Performers ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend Performers ETF 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 Dividend Performers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend Performers ETF has no effect on the direction of Visa i.e., Visa and Dividend Performers go up and down completely randomly.

Pair Corralation between Visa and Dividend Performers

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.03 times more return on investment than Dividend Performers. However, Visa is 1.03 times more volatile than Dividend Performers ETF. It trades about 0.25 of its potential returns per unit of risk. Dividend Performers ETF is currently generating about -0.05 per unit of risk. If you would invest  31,612  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  4,659  from holding Visa Class A or generate 14.74% return on investment over 90 days.

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

Visa Class A  vs.  Dividend Performers ETF

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

Dividend Performers ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dividend Performers ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Dividend Performers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Visa and Dividend Performers

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

The idea behind Visa Class A and Dividend Performers ETF 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.