Correlation Between Visa and Stance Sustainable

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

Diversification Opportunities for Visa and Stance Sustainable

0.46

Correlation Coefficient

Visa  Stance Sustainable

Very weak diversification

The 3 months correlation between Visa and Stance is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Stance Sustainable Beta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stance Sustainable Beta 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 Stance Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stance Sustainable Beta has no effect on the direction of Visa i.e., Visa and Stance Sustainable go up and down completely randomly.

Pair Corralation between Visa and Stance Sustainable

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.22 times more return on investment than Stance Sustainable. However, Visa is 1.22 times more volatile than Stance Sustainable Beta. It trades about 0.08 of its potential returns per unit of risk. Stance Sustainable Beta is currently generating about -0.01 per unit of risk. If you would invest  21,956  in Visa Class A on October 7, 2024 and sell it today you would earn a total of  9,535  from holding Visa Class A or generate 43.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	6.85%
Values	Daily Returns

Visa Class A  vs.  Stance Sustainable Beta

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.

Stance Sustainable Beta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stance Sustainable Beta has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Stance Sustainable is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Stance Sustainable

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

The idea behind Visa Class A and Stance Sustainable Beta 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.