Correlation Between Visa and SPDR SSGA

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

Diversification Opportunities for Visa and SPDR SSGA

0.77

Correlation Coefficient

Visa  SPDR SSGA

Poor diversification

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

Pair Corralation between Visa and SPDR SSGA

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.94 times more return on investment than SPDR SSGA. However, Visa is 1.94 times more volatile than SPDR SSGA Gender. It trades about 0.13 of its potential returns per unit of risk. SPDR SSGA Gender is currently generating about 0.21 per unit of risk. If you would invest  28,342  in Visa Class A on September 11, 2024 and sell it today you would earn a total of  2,896  from holding Visa Class A or generate 10.22% 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.  SPDR SSGA Gender

Visa Class A

Risk-Adjusted Performance

9 of 100

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 January 2025.

SPDR SSGA Gender

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA Gender are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, SPDR SSGA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and SPDR SSGA

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

The idea behind Visa Class A and SPDR SSGA Gender 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 Transaction History module to view history of all your transactions and understand their impact on performance.