Correlation Between Visa and Newlake Capital

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

Diversification Opportunities for Visa and Newlake Capital

-0.67

Correlation Coefficient

Visa  Newlake Capital

Excellent diversification

The 3 months correlation between Visa and Newlake is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners 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 Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of Visa i.e., Visa and Newlake Capital go up and down completely randomly.

Pair Corralation between Visa and Newlake Capital

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.67 times more return on investment than Newlake Capital. However, Visa Class A is 1.5 times less risky than Newlake Capital. It trades about 0.05 of its potential returns per unit of risk. Newlake Capital Partners is currently generating about -0.22 per unit of risk. If you would invest  31,301  in Visa Class A on October 4, 2024 and sell it today you would earn a total of  303.00  from holding Visa Class A or generate 0.97% return on investment over 90 days.

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

Visa Class A  vs.  Newlake Capital Partners

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Newlake Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Visa and Newlake Capital

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

The idea behind Visa Class A and Newlake Capital Partners 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.