Correlation Between Visa and Next Generation

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

Diversification Opportunities for Visa and Next Generation

0.04

Correlation Coefficient

Visa  Next Generation

Significant diversification

The 3 months correlation between Visa and Next is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Next Generation Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Generation Mana 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 Next Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Generation Mana has no effect on the direction of Visa i.e., Visa and Next Generation go up and down completely randomly.

Pair Corralation between Visa and Next Generation

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.05 times more return on investment than Next Generation. However, Visa Class A is 20.45 times less risky than Next Generation. It trades about 0.09 of its potential returns per unit of risk. Next Generation Management is currently generating about -0.14 per unit of risk. If you would invest  30,985  in Visa Class A on September 13, 2024 and sell it today you would earn a total of  438.00  from holding Visa Class A or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Visa Class A  vs.  Next Generation Management

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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 January 2025.

Next Generation Mana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Next Generation Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Next Generation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Next Generation

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

The idea behind Visa Class A and Next Generation Management 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.