Correlation Between Visa and Seaboard

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

Diversification Opportunities for Visa and Seaboard

0.72

Correlation Coefficient

Visa  Seaboard

Poor diversification

The 3 months correlation between Visa and Seaboard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Seaboard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaboard 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 Seaboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaboard has no effect on the direction of Visa i.e., Visa and Seaboard go up and down completely randomly.

Pair Corralation between Visa and Seaboard

Taking into account the 90-day investment horizon Visa is expected to generate 1.34 times less return on investment than Seaboard. But when comparing it to its historical volatility, Visa Class A is 2.29 times less risky than Seaboard. It trades about 0.13 of its potential returns per unit of risk. Seaboard is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  240,581  in Seaboard on December 27, 2024 and sell it today you would earn a total of  23,199  from holding Seaboard or generate 9.64% 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.  Seaboard

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.

Seaboard

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seaboard are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Seaboard may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Seaboard

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

The idea behind Visa Class A and Seaboard 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.