Correlation Between Visa and Thunder Bridge

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

Diversification Opportunities for Visa and Thunder Bridge

0.72

Correlation Coefficient

Visa  Thunder Bridge

Poor diversification

The 3 months correlation between Visa and Thunder is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Thunder Bridge Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Bridge Capital 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 Thunder Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Bridge Capital has no effect on the direction of Visa i.e., Visa and Thunder Bridge go up and down completely randomly.

Pair Corralation between Visa and Thunder Bridge

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.56 times more return on investment than Thunder Bridge. However, Visa is 1.56 times more volatile than Thunder Bridge Capital. It trades about 0.14 of its potential returns per unit of risk. Thunder Bridge Capital is currently generating about 0.14 per unit of risk. If you would invest  27,995  in Visa Class A on September 4, 2024 and sell it today you would earn a total of  3,306  from holding Visa Class A or generate 11.81% 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.  Thunder Bridge Capital

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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 January 2025.

Thunder Bridge Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thunder Bridge Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Thunder Bridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Thunder Bridge

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

The idea behind Visa Class A and Thunder Bridge Capital 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.