Correlation Between Visa and Barclays Capital

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

Diversification Opportunities for Visa and Barclays Capital

-0.21

Correlation Coefficient

Visa  Barclays Capital

Very good diversification

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

Pair Corralation between Visa and Barclays Capital

Taking into account the 90-day investment horizon Visa is expected to generate 1.1 times less return on investment than Barclays Capital. But when comparing it to its historical volatility, Visa Class A is 1.74 times less risky than Barclays Capital. It trades about 0.09 of its potential returns per unit of risk. Barclays Capital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,763  in Barclays Capital on September 16, 2024 and sell it today you would earn a total of  637.00  from holding Barclays Capital or generate 13.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.83%
Values	Daily Returns

Visa Class A  vs.  Barclays Capital

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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.

Barclays Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barclays Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Barclays Capital is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and Barclays Capital

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

The idea behind Visa Class A and Barclays Capital 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.