Correlation Between Visa and Southeastern Banking

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

Diversification Opportunities for Visa and Southeastern Banking

0.25

Correlation Coefficient

Visa  Southeastern Banking

Modest diversification

The 3 months correlation between Visa and Southeastern is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Southeastern Banking Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southeastern Banking Corp 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 Southeastern Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southeastern Banking Corp has no effect on the direction of Visa i.e., Visa and Southeastern Banking go up and down completely randomly.

Pair Corralation between Visa and Southeastern Banking

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.52 times more return on investment than Southeastern Banking. However, Visa Class A is 1.93 times less risky than Southeastern Banking. It trades about 0.29 of its potential returns per unit of risk. Southeastern Banking Corp is currently generating about 0.04 per unit of risk. If you would invest  30,938  in Visa Class A on December 4, 2024 and sell it today you would earn a total of  5,244  from holding Visa Class A or generate 16.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.53%
Values	Daily Returns

Visa Class A  vs.  Southeastern Banking Corp

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 23 (%) 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.

Southeastern Banking Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southeastern Banking Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Southeastern Banking is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Southeastern Banking

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

The idea behind Visa Class A and Southeastern Banking Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.