Correlation Between Visa and Strattec Security

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

Diversification Opportunities for Visa and Strattec Security

0.68

Correlation Coefficient

Visa  Strattec Security

Poor diversification

The 3 months correlation between Visa and Strattec is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Strattec Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strattec Security 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 Strattec Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strattec Security has no effect on the direction of Visa i.e., Visa and Strattec Security go up and down completely randomly.

Pair Corralation between Visa and Strattec Security

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.4 times more return on investment than Strattec Security. However, Visa Class A is 2.5 times less risky than Strattec Security. It trades about 0.1 of its potential returns per unit of risk. Strattec Security is currently generating about 0.02 per unit of risk. If you would invest  30,521  in Visa Class A on October 8, 2024 and sell it today you would earn a total of  970.00  from holding Visa Class A or generate 3.18% 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.  Strattec Security

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Strattec Security

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Strattec Security are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Strattec Security may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Strattec Security

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

The idea behind Visa Class A and Strattec Security 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.