Correlation Between Visa and Vanguard Growth

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

Diversification Opportunities for Visa and Vanguard Growth

0.84

Correlation Coefficient

Visa  Vanguard Growth

Very poor diversification

The 3 months correlation between Visa and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Visa i.e., Visa and Vanguard Growth go up and down completely randomly.

Pair Corralation between Visa and Vanguard Growth

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.93 times more return on investment than Vanguard Growth. However, Visa Class A is 1.08 times less risky than Vanguard Growth. It trades about 0.18 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.09 per unit of risk. If you would invest  28,424  in Visa Class A on October 22, 2024 and sell it today you would earn a total of  3,538  from holding Visa Class A or generate 12.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  Vanguard Growth Index

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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.

Vanguard Growth Index

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Vanguard Growth

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

The idea behind Visa Class A and Vanguard Growth Index 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.