Correlation Between Visa and Clearbridge Mid

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

Diversification Opportunities for Visa and Clearbridge Mid

0.77

Correlation Coefficient

Visa  Clearbridge Mid

Poor diversification

The 3 months correlation between Visa and Clearbridge is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Clearbridge Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Mid Cap 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 Clearbridge Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Mid Cap has no effect on the direction of Visa i.e., Visa and Clearbridge Mid go up and down completely randomly.

Pair Corralation between Visa and Clearbridge Mid

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.23 times more return on investment than Clearbridge Mid. However, Visa is 1.23 times more volatile than Clearbridge Mid Cap. It trades about 0.28 of its potential returns per unit of risk. Clearbridge Mid Cap is currently generating about 0.2 per unit of risk. If you would invest  27,442  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  4,028  from holding Visa Class A or generate 14.68% return on investment over 90 days.

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

Visa Class A  vs.  Clearbridge Mid Cap

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Clearbridge Mid Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Mid Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Clearbridge Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Clearbridge Mid

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

The idea behind Visa Class A and Clearbridge Mid Cap 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.