Correlation Between Visa and ModivCare

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

Diversification Opportunities for Visa and ModivCare

-0.44

Correlation Coefficient

Visa  ModivCare

Very good diversification

The 3 months correlation between Visa and ModivCare is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare 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 ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of Visa i.e., Visa and ModivCare go up and down completely randomly.

Pair Corralation between Visa and ModivCare

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.1 times more return on investment than ModivCare. However, Visa Class A is 9.56 times less risky than ModivCare. It trades about 0.15 of its potential returns per unit of risk. ModivCare is currently generating about -0.24 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  ModivCare

Visa Class A

Risk-Adjusted Performance

Good

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.

ModivCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Visa and ModivCare

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

The idea behind Visa Class A and ModivCare 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.