Correlation Between Visa and RBC Quant

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

Diversification Opportunities for Visa and RBC Quant

0.55

Correlation Coefficient

Visa  RBC Quant

Very weak diversification

The 3 months correlation between Visa and RBC is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and RBC Quant EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant EAFE 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 RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant EAFE has no effect on the direction of Visa i.e., Visa and RBC Quant go up and down completely randomly.

Pair Corralation between Visa and RBC Quant

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.74 times more return on investment than RBC Quant. However, Visa is 1.74 times more volatile than RBC Quant EAFE. It trades about 0.13 of its potential returns per unit of risk. RBC Quant EAFE is currently generating about 0.21 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  2,606  from holding Visa Class A or generate 8.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Visa Class A  vs.  RBC Quant EAFE

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 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 April 2025.

RBC Quant EAFE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant EAFE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, RBC Quant may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and RBC Quant

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

The idea behind Visa Class A and RBC Quant EAFE 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.