Correlation Between Visa and Reitmans

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

Diversification Opportunities for Visa and Reitmans

0.28

Correlation Coefficient

Visa  Reitmans

Modest diversification

The 3 months correlation between Visa and Reitmans is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans Limited 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 Reitmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans Limited has no effect on the direction of Visa i.e., Visa and Reitmans go up and down completely randomly.

Pair Corralation between Visa and Reitmans

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Reitmans. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.38 times less risky than Reitmans. The stock trades about -0.14 of its potential returns per unit of risk. The Reitmans Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Reitmans Limited on October 15, 2024 and sell it today you would earn a total of  3.00  from holding Reitmans Limited or generate 1.5% return on investment over 90 days.

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

Visa Class A  vs.  Reitmans Limited

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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 February 2025.

Reitmans Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reitmans Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reitmans is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and Reitmans

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

The idea behind Visa Class A and Reitmans Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.