Correlation Between Visa and 00108WAH3

Can any of the company-specific risk be diversified away by investing in both Visa and 00108WAH3 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 00108WAH3 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 AEP TEX INC, you can compare the effects of market volatilities on Visa and 00108WAH3 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 00108WAH3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and 00108WAH3.

Diversification Opportunities for Visa and 00108WAH3

-0.53

Correlation Coefficient

Visa  00108WAH3

Excellent diversification

The 3 months correlation between Visa and 00108WAH3 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC 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 00108WAH3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Visa i.e., Visa and 00108WAH3 go up and down completely randomly.

Pair Corralation between Visa and 00108WAH3

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.72 times more return on investment than 00108WAH3. However, Visa Class A is 1.4 times less risky than 00108WAH3. It trades about 0.14 of its potential returns per unit of risk. AEP TEX INC is currently generating about -0.32 per unit of risk. If you would invest  32,065  in Visa Class A on October 25, 2024 and sell it today you would earn a total of  756.00  from holding Visa Class A or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.95%
Values	Daily Returns

Visa Class A  vs.  AEP TEX INC

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

AEP TEX INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEP TEX INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AEP TEX INC investors.

Pair Trading with Visa and 00108WAH3

The main advantage of trading using opposite Visa and 00108WAH3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, 00108WAH3 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 00108WAH3 will offset losses from the drop in 00108WAH3's long position.

The idea behind Visa Class A and AEP TEX INC 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.