Correlation Between Visa and CHURCH

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

Diversification Opportunities for Visa and CHURCH

0.29

Correlation Coefficient

Visa  CHURCH

Modest diversification

The 3 months correlation between Visa and CHURCH is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CHURCH DWIGHT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHURCH DWIGHT 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 CHURCH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHURCH DWIGHT INC has no effect on the direction of Visa i.e., Visa and CHURCH go up and down completely randomly.

Pair Corralation between Visa and CHURCH

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the CHURCH. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.68 times less risky than CHURCH. The stock trades about -0.02 of its potential returns per unit of risk. The CHURCH DWIGHT INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,855  in CHURCH DWIGHT INC on October 12, 2024 and sell it today you would earn a total of  80.00  from holding CHURCH DWIGHT INC or generate 1.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

Visa Class A  vs.  CHURCH DWIGHT INC

Visa Class A

Risk-Adjusted Performance

13 of 100

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 February 2025.

CHURCH DWIGHT INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHURCH DWIGHT INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 CHURCH DWIGHT INC investors.

Pair Trading with Visa and CHURCH

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

The idea behind Visa Class A and CHURCH DWIGHT 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.

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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.