Correlation Between Visa and IShares NAFTRAC

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

Diversification Opportunities for Visa and IShares NAFTRAC

0.89

Correlation Coefficient

Visa  IShares NAFTRAC

Very poor diversification

The 3 months correlation between Visa and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and iShares NAFTRAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NAFTRAC 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 IShares NAFTRAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NAFTRAC has no effect on the direction of Visa i.e., Visa and IShares NAFTRAC go up and down completely randomly.

Pair Corralation between Visa and IShares NAFTRAC

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.34 times more return on investment than IShares NAFTRAC. However, Visa is 1.34 times more volatile than iShares NAFTRAC. It trades about 0.1 of its potential returns per unit of risk. iShares NAFTRAC is currently generating about 0.13 per unit of risk. If you would invest  31,669  in Visa Class A on December 22, 2024 and sell it today you would earn a total of  1,897  from holding Visa Class A or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  iShares NAFTRAC

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 7 (%) 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.

iShares NAFTRAC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NAFTRAC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares NAFTRAC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and IShares NAFTRAC

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

The idea behind Visa Class A and iShares NAFTRAC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.