Correlation Between Visa and Medallion Bank

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

Diversification Opportunities for Visa and Medallion Bank

0.28

Correlation Coefficient

Visa  Medallion Bank

Modest diversification

The 3 months correlation between Visa and Medallion is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Medallion Bank PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Bank PR 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 Medallion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Bank PR has no effect on the direction of Visa i.e., Visa and Medallion Bank go up and down completely randomly.

Pair Corralation between Visa and Medallion Bank

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.51 times more return on investment than Medallion Bank. However, Visa is 1.51 times more volatile than Medallion Bank PR. It trades about 0.15 of its potential returns per unit of risk. Medallion Bank PR is currently generating about 0.07 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  3,174  from holding Visa Class A or generate 9.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Medallion Bank PR

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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 April 2025.

Medallion Bank PR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Bank PR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Medallion Bank 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 Medallion Bank

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

The idea behind Visa Class A and Medallion Bank PR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.