Correlation Between Visa and Signal Advance

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

Diversification Opportunities for Visa and Signal Advance

0.22

Correlation Coefficient

Visa  Signal Advance

Modest diversification

The 3 months correlation between Visa and Signal is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Signal Advance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signal Advance 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 Signal Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signal Advance has no effect on the direction of Visa i.e., Visa and Signal Advance go up and down completely randomly.

Pair Corralation between Visa and Signal Advance

Taking into account the 90-day investment horizon Visa is expected to generate 10.96 times less return on investment than Signal Advance. But when comparing it to its historical volatility, Visa Class A is 16.13 times less risky than Signal Advance. It trades about 0.08 of its potential returns per unit of risk. Signal Advance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7.80  in Signal Advance on September 18, 2024 and sell it today you would lose (0.05) from holding Signal Advance or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Signal Advance

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Signal Advance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Signal Advance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Signal Advance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Signal Advance

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

The idea behind Visa Class A and Signal Advance 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.