Correlation Between Visa and 191216CW8

Can any of the company-specific risk be diversified away by investing in both Visa and 191216CW8 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 191216CW8 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 COCA COLA CO, you can compare the effects of market volatilities on Visa and 191216CW8 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 191216CW8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and 191216CW8.

Diversification Opportunities for Visa and 191216CW8

-0.17

Correlation Coefficient

Visa  191216CW8

Good diversification

The 3 months correlation between Visa and 191216CW8 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216CW8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Visa i.e., Visa and 191216CW8 go up and down completely randomly.

Pair Corralation between Visa and 191216CW8

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.68 times more return on investment than 191216CW8. However, Visa Class A is 1.48 times less risky than 191216CW8. It trades about 0.22 of its potential returns per unit of risk. COCA COLA CO is currently generating about 0.09 per unit of risk. If you would invest  28,119  in Visa Class A on October 25, 2024 and sell it today you would earn a total of  4,237  from holding Visa Class A or generate 15.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Visa Class A  vs.  COCA COLA CO

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.

COCA A CO

Risk-Adjusted Performance

7 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COCA COLA CO are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, 191216CW8 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and 191216CW8

The main advantage of trading using opposite Visa and 191216CW8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, 191216CW8 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 191216CW8 will offset losses from the drop in 191216CW8's long position.

The idea behind Visa Class A and COCA COLA CO 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.