Correlation Between Visa and WHG FINVEST

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

Diversification Opportunities for Visa and WHG FINVEST

-0.19

Correlation Coefficient

Visa  WHG FINVEST

Good diversification

The 3 months correlation between Visa and WHG is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and WHG FINVEST SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHG FINVEST SP 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 WHG FINVEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHG FINVEST SP has no effect on the direction of Visa i.e., Visa and WHG FINVEST go up and down completely randomly.

Pair Corralation between Visa and WHG FINVEST

Taking into account the 90-day investment horizon Visa is expected to generate 2.31 times less return on investment than WHG FINVEST. But when comparing it to its historical volatility, Visa Class A is 3.87 times less risky than WHG FINVEST. It trades about 0.08 of its potential returns per unit of risk. WHG FINVEST SP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  117,732  in WHG FINVEST SP on December 17, 2024 and sell it today you would earn a total of  8,935  from holding WHG FINVEST SP or generate 7.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Visa Class A  vs.  WHG FINVEST SP

Visa Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WHG FINVEST SP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WHG FINVEST SP are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak fundamental indicators, WHG FINVEST sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and WHG FINVEST

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

The idea behind Visa Class A and WHG FINVEST SP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.