Correlation Between Visa and Cleanaway Waste

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

Diversification Opportunities for Visa and Cleanaway Waste

0.05

Correlation Coefficient

Visa  Cleanaway Waste

Significant diversification

The 3 months correlation between Visa and Cleanaway is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Cleanaway Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway Waste Mana 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 Cleanaway Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway Waste Mana has no effect on the direction of Visa i.e., Visa and Cleanaway Waste go up and down completely randomly.

Pair Corralation between Visa and Cleanaway Waste

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.14 times more return on investment than Cleanaway Waste. However, Visa Class A is 6.98 times less risky than Cleanaway Waste. It trades about 0.17 of its potential returns per unit of risk. Cleanaway Waste Management is currently generating about 0.01 per unit of risk. If you would invest  31,478  in Visa Class A on December 28, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Cleanaway Waste Management

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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 April 2025.

Cleanaway Waste Mana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cleanaway Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Cleanaway Waste is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and Cleanaway Waste

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

The idea behind Visa Class A and Cleanaway Waste Management 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.