Correlation Between Visa and Semtech

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

Diversification Opportunities for Visa and Semtech

-0.7

Correlation Coefficient

Visa  Semtech

Excellent diversification

The 3 months correlation between Visa and Semtech is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech 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 Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Visa i.e., Visa and Semtech go up and down completely randomly.

Pair Corralation between Visa and Semtech

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.15 times more return on investment than Semtech. However, Visa Class A is 6.81 times less risky than Semtech. It trades about 0.13 of its potential returns per unit of risk. Semtech is currently generating about -0.07 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  2,606  from holding Visa Class A or generate 8.19% return on investment over 90 days.

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

Visa Class A  vs.  Semtech

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.

Semtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Visa and Semtech

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

The idea behind Visa Class A and Semtech 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.