Correlation Between Visa and IncomeShares Nasdaq

Can any of the company-specific risk be diversified away by investing in both Visa and IncomeShares Nasdaq 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 IncomeShares Nasdaq 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 IncomeShares Nasdaq 100, you can compare the effects of market volatilities on Visa and IncomeShares Nasdaq 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 IncomeShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and IncomeShares Nasdaq.

Diversification Opportunities for Visa and IncomeShares Nasdaq

0.67

Correlation Coefficient

Visa  IncomeShares Nasdaq

Poor diversification

The 3 months correlation between Visa and IncomeShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and IncomeShares Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Nasdaq 100 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 IncomeShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Nasdaq 100 has no effect on the direction of Visa i.e., Visa and IncomeShares Nasdaq go up and down completely randomly.

Pair Corralation between Visa and IncomeShares Nasdaq

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.22 times more return on investment than IncomeShares Nasdaq. However, Visa is 1.22 times more volatile than IncomeShares Nasdaq 100. It trades about 0.09 of its potential returns per unit of risk. IncomeShares Nasdaq 100 is currently generating about 0.06 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	89.47%
Values	Daily Returns

Visa Class A  vs.  IncomeShares Nasdaq 100

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.

IncomeShares Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IncomeShares Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Visa and IncomeShares Nasdaq

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

The idea behind Visa Class A and IncomeShares Nasdaq 100 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.