Correlation Between Visa and James River

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

Diversification Opportunities for Visa and James River

-0.85

Correlation Coefficient

Visa  James River

Pay attention - limited upside

The 3 months correlation between Visa and James is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and James River Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James River Group 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 River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James River Group has no effect on the direction of Visa i.e., Visa and James River go up and down completely randomly.

Pair Corralation between Visa and James River

Taking into account the 90-day investment horizon Visa is expected to generate 3.9 times less return on investment than James River. But when comparing it to its historical volatility, Visa Class A is 2.63 times less risky than James River. It trades about 0.05 of its potential returns per unit of risk. James River Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  466.00  in James River Group on October 23, 2024 and sell it today you would earn a total of  13.00  from holding James River Group or generate 2.79% return on investment over 90 days.

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

Visa Class A  vs.  James River Group

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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 River Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James River Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Visa and James River

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

The idea behind Visa Class A and James River Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.