Correlation Between Visa and James Small

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

Diversification Opportunities for Visa and James Small

0.04

Correlation Coefficient

Visa  James Small

Significant diversification

The 3 months correlation between Visa and James is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and James Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Small Cap 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 James Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Small Cap has no effect on the direction of Visa i.e., Visa and James Small go up and down completely randomly.

Pair Corralation between Visa and James Small

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.92 times more return on investment than James Small. However, Visa Class A is 1.09 times less risky than James Small. It trades about 0.09 of its potential returns per unit of risk. James Small Cap is currently generating about -0.25 per unit of risk. If you would invest  30,830  in Visa Class A on October 9, 2024 and sell it today you would earn a total of  474.00  from holding Visa Class A or generate 1.54% return on investment over 90 days.

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

Visa Class A  vs.  James Small Cap

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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.

James Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, James Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and James Small

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

The idea behind Visa Class A and James Small Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.