Correlation Between Visa and SPDR Russell

Can any of the company-specific risk be diversified away by investing in both Visa and SPDR Russell 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 SPDR Russell 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 SPDR Russell 1000, you can compare the effects of market volatilities on Visa and SPDR Russell 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 SPDR Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SPDR Russell.

Diversification Opportunities for Visa and SPDR Russell

0.6

Correlation Coefficient

Visa  SPDR Russell

Poor diversification

The 3 months correlation between Visa and SPDR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 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 SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of Visa i.e., Visa and SPDR Russell go up and down completely randomly.

Pair Corralation between Visa and SPDR Russell

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.05 times more return on investment than SPDR Russell. However, Visa is 1.05 times more volatile than SPDR Russell 1000. It trades about 0.09 of its potential returns per unit of risk. SPDR Russell 1000 is currently generating about -0.25 per unit of risk. If you would invest  30,830  in Visa Class A on October 9, 2024 and sell it today you would earn a total of  474.00  from holding Visa Class A or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Visa Class A  vs.  SPDR Russell 1000

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.

SPDR Russell 1000

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and SPDR Russell

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

The idea behind Visa Class A and SPDR Russell 1000 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.