Correlation Between Visa and MultiPlan

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

Diversification Opportunities for Visa and MultiPlan

0.87

Correlation Coefficient

Visa  MultiPlan

Very poor diversification

The 3 months correlation between Visa and MultiPlan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and MultiPlan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MultiPlan 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 MultiPlan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MultiPlan has no effect on the direction of Visa i.e., Visa and MultiPlan go up and down completely randomly.

Pair Corralation between Visa and MultiPlan

Taking into account the 90-day investment horizon Visa is expected to generate 8.01 times less return on investment than MultiPlan. But when comparing it to its historical volatility, Visa Class A is 10.65 times less risky than MultiPlan. It trades about 0.18 of its potential returns per unit of risk. MultiPlan is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  895.00  in MultiPlan on November 20, 2024 and sell it today you would earn a total of  1,866  from holding MultiPlan or generate 208.49% return on investment over 90 days.

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

Visa Class A  vs.  MultiPlan

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 21 (%) 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.

MultiPlan

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MultiPlan are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, MultiPlan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and MultiPlan

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

The idea behind Visa Class A and MultiPlan 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.