Correlation Between Visa and Invesco Treasury

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

Diversification Opportunities for Visa and Invesco Treasury

-0.81

Correlation Coefficient

Visa  Invesco Treasury

Pay attention - limited upside

The 3 months correlation between Visa and Invesco is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Invesco Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Treasury Bond 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 Invesco Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Treasury Bond has no effect on the direction of Visa i.e., Visa and Invesco Treasury go up and down completely randomly.

Pair Corralation between Visa and Invesco Treasury

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.55 times more return on investment than Invesco Treasury. However, Visa Class A is 1.81 times less risky than Invesco Treasury. It trades about 0.07 of its potential returns per unit of risk. Invesco Treasury Bond is currently generating about 0.0 per unit of risk. If you would invest  22,775  in Visa Class A on September 29, 2024 and sell it today you would earn a total of  9,091  from holding Visa Class A or generate 39.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	63.03%
Values	Daily Returns

Visa Class A  vs.  Invesco Treasury Bond

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

Invesco Treasury Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Invesco Treasury is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Visa and Invesco Treasury

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

The idea behind Visa Class A and Invesco Treasury Bond 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.