Correlation Between Visa and Sena Development

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

Diversification Opportunities for Visa and Sena Development

-0.38

Correlation Coefficient

Visa  Sena Development

Very good diversification

The 3 months correlation between Visa and Sena is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sena Development Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sena Development Public 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 Sena Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sena Development Public has no effect on the direction of Visa i.e., Visa and Sena Development go up and down completely randomly.

Pair Corralation between Visa and Sena Development

Taking into account the 90-day investment horizon Visa is expected to generate 22.93 times less return on investment than Sena Development. But when comparing it to its historical volatility, Visa Class A is 45.52 times less risky than Sena Development. It trades about 0.08 of its potential returns per unit of risk. Sena Development Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  366.00  in Sena Development Public on October 25, 2024 and sell it today you would lose (148.00) from holding Sena Development Public or give up 40.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.36%
Values	Daily Returns

Visa Class A  vs.  Sena Development Public

Visa Class A

Risk-Adjusted Performance

17 of 100

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 showed solid returns over the last few months and may actually be approaching a breakup point.

Sena Development Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sena Development Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Visa and Sena Development

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

The idea behind Visa Class A and Sena Development Public 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.