Correlation Between Visa and Medtronic Plc

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

Diversification Opportunities for Visa and Medtronic Plc

0.08

Correlation Coefficient

Visa  Medtronic Plc

Significant diversification

The 3 months correlation between Visa and Medtronic is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Medtronic plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic plc 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 Medtronic Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic plc has no effect on the direction of Visa i.e., Visa and Medtronic Plc go up and down completely randomly.

Pair Corralation between Visa and Medtronic Plc

Taking into account the 90-day investment horizon Visa is expected to generate 16.25 times less return on investment than Medtronic Plc. But when comparing it to its historical volatility, Visa Class A is 1.8 times less risky than Medtronic Plc. It trades about 0.01 of its potential returns per unit of risk. Medtronic plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  24,789  in Medtronic plc on October 17, 2024 and sell it today you would earn a total of  851.00  from holding Medtronic plc or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Visa Class A  vs.  Medtronic plc

Visa Class A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 February 2025.

Medtronic plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Medtronic Plc 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 Medtronic Plc

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

The idea behind Visa Class A and Medtronic plc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.