Correlation Between Visa and United States

Can any of the company-specific risk be diversified away by investing in both Visa and United States 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 United States 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 United States 12, you can compare the effects of market volatilities on Visa and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and United States.

Diversification Opportunities for Visa and United States

0.78

Correlation Coefficient

Visa  United States

Poor diversification

The 3 months correlation between Visa and United is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and United States 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States 12 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States 12 has no effect on the direction of Visa i.e., Visa and United States go up and down completely randomly.

Pair Corralation between Visa and United States

Taking into account the 90-day investment horizon Visa is expected to generate 1.92 times less return on investment than United States. But when comparing it to its historical volatility, Visa Class A is 2.55 times less risky than United States. It trades about 0.25 of its potential returns per unit of risk. United States 12 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  743.00  in United States 12 on December 2, 2024 and sell it today you would earn a total of  213.00  from holding United States 12 or generate 28.67% 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.  United States 12

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

United States 12

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States 12 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, United States disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and United States

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

The idea behind Visa Class A and United States 12 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.