Correlation Between Visa and ETF Series

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

Diversification Opportunities for Visa and ETF Series

0.89

Correlation Coefficient

Visa  ETF Series

Very poor diversification

The 3 months correlation between Visa and ETF is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Visa i.e., Visa and ETF Series go up and down completely randomly.

Pair Corralation between Visa and ETF Series

Taking into account the 90-day investment horizon Visa Class A is expected to generate 9.51 times more return on investment than ETF Series. However, Visa is 9.51 times more volatile than ETF Series Solutions. It trades about 0.11 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.41 per unit of risk. If you would invest  30,964  in Visa Class A on September 16, 2024 and sell it today you would earn a total of  510.00  from holding Visa Class A or generate 1.65% return on investment over 90 days.

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

Visa Class A  vs.  ETF Series Solutions

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ETF Series Solutions

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, ETF Series is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and ETF Series

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

The idea behind Visa Class A and ETF Series Solutions 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.