Correlation Between Visa and IShares III

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

Diversification Opportunities for Visa and IShares III

-0.02

Correlation Coefficient

Visa  IShares III

Good diversification

The 3 months correlation between Visa and IShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and iShares III Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares III Public 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 IShares III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares III Public has no effect on the direction of Visa i.e., Visa and IShares III go up and down completely randomly.

Pair Corralation between Visa and IShares III

Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.77 times more return on investment than IShares III. However, Visa is 2.77 times more volatile than iShares III Public. It trades about 0.09 of its potential returns per unit of risk. iShares III Public is currently generating about 0.05 per unit of risk. If you would invest  20,419  in Visa Class A on September 23, 2024 and sell it today you would earn a total of  11,352  from holding Visa Class A or generate 55.6% return on investment over 90 days.

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

Visa Class A  vs.  iShares III Public

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

iShares III Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares III Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares III is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and IShares III

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

The idea behind Visa Class A and iShares III Public 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..