Correlation Between Visa and Corporate Bond

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

Diversification Opportunities for Visa and Corporate Bond

-0.47

Correlation Coefficient

Visa  Corporate Bond

Very good diversification

The 3 months correlation between Visa and Corporate is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Corporate Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Bond Portfolio 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 Corporate Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Bond Portfolio has no effect on the direction of Visa i.e., Visa and Corporate Bond go up and down completely randomly.

Pair Corralation between Visa and Corporate Bond

Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.43 times more return on investment than Corporate Bond. However, Visa is 2.43 times more volatile than Corporate Bond Portfolio. It trades about 0.09 of its potential returns per unit of risk. Corporate Bond Portfolio is currently generating about 0.06 per unit of risk. If you would invest  20,456  in Visa Class A on September 20, 2024 and sell it today you would earn a total of  11,123  from holding Visa Class A or generate 54.38% 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.  Corporate Bond Portfolio

Visa Class A

Risk-Adjusted Performance

11 of 100

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Corporate Bond Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporate Bond Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Corporate Bond 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 Corporate Bond

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

The idea behind Visa Class A and Corporate Bond Portfolio 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 CEOs Directory module to screen CEOs from public companies around the world.