Correlation Between Visa and Square

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

Diversification Opportunities for Visa and Square

0.93

Correlation Coefficient

Visa  Square

Almost no diversification

The 3 months correlation between Visa and Square is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Square Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Square Inc 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 Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Square Inc has no effect on the direction of Visa i.e., Visa and Square go up and down completely randomly.

Pair Corralation between Visa and Square

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.33 times more return on investment than Square. However, Visa Class A is 3.06 times less risky than Square. It trades about 0.13 of its potential returns per unit of risk. Square Inc is currently generating about -0.04 per unit of risk. If you would invest  30,990  in Visa Class A on September 22, 2024 and sell it today you would earn a total of  781.00  from holding Visa Class A or generate 2.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Square Inc

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.

Square Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Square Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Square reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Square

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

The idea behind Visa Class A and Square Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.