Correlation Between Visa and TRAVELERS

Can any of the company-specific risk be diversified away by investing in both Visa and TRAVELERS 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 TRAVELERS 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 TRAVELERS INC 4, you can compare the effects of market volatilities on Visa and TRAVELERS 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 TRAVELERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and TRAVELERS.

Diversification Opportunities for Visa and TRAVELERS

-0.51

Correlation Coefficient

Visa  TRAVELERS

Excellent diversification

The 3 months correlation between Visa and TRAVELERS is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and TRAVELERS INC 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVELERS INC 4 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 TRAVELERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVELERS INC 4 has no effect on the direction of Visa i.e., Visa and TRAVELERS go up and down completely randomly.

Pair Corralation between Visa and TRAVELERS

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.49 times more return on investment than TRAVELERS. However, Visa Class A is 2.03 times less risky than TRAVELERS. It trades about 0.28 of its potential returns per unit of risk. TRAVELERS INC 4 is currently generating about 0.0 per unit of risk. If you would invest  34,524  in Visa Class A on December 5, 2024 and sell it today you would earn a total of  1,658  from holding Visa Class A or generate 4.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Visa Class A  vs.  TRAVELERS INC 4

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 23 (%) 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.

TRAVELERS INC 4

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAVELERS INC 4 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 TRAVELERS INC 4 investors.

Pair Trading with Visa and TRAVELERS

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

The idea behind Visa Class A and TRAVELERS INC 4 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.