Correlation Between Visa and Stellus Capital

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

Diversification Opportunities for Visa and Stellus Capital

0.91

Correlation Coefficient

Visa  Stellus Capital

Almost no diversification

The 3 months correlation between Visa and Stellus is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Stellus Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellus Capital Inve 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 Stellus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellus Capital Inve has no effect on the direction of Visa i.e., Visa and Stellus Capital go up and down completely randomly.

Pair Corralation between Visa and Stellus Capital

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.14 times more return on investment than Stellus Capital. However, Visa is 1.14 times more volatile than Stellus Capital Investment. It trades about 0.12 of its potential returns per unit of risk. Stellus Capital Investment is currently generating about 0.11 per unit of risk. If you would invest  24,072  in Visa Class A on November 28, 2024 and sell it today you would earn a total of  11,137  from holding Visa Class A or generate 46.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.69%
Values	Daily Returns

Visa Class A  vs.  Stellus Capital Investment

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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 March 2025.

Stellus Capital Inve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellus Capital Investment are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Stellus Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Stellus Capital

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

The idea behind Visa Class A and Stellus Capital Investment 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..