Correlation Between Visa and Ventas

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

Diversification Opportunities for Visa and Ventas

0.3

Correlation Coefficient

Visa  Ventas

Weak diversification

The 3 months correlation between Visa and Ventas is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Ventas Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventas 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 Ventas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventas Inc has no effect on the direction of Visa i.e., Visa and Ventas go up and down completely randomly.

Pair Corralation between Visa and Ventas

Taking into account the 90-day investment horizon Visa is expected to generate 1.09 times less return on investment than Ventas. But when comparing it to its historical volatility, Visa Class A is 1.46 times less risky than Ventas. It trades about 0.08 of its potential returns per unit of risk. Ventas Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,254  in Ventas Inc on September 2, 2024 and sell it today you would earn a total of  2,153  from holding Ventas Inc or generate 50.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Ventas Inc

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Ventas Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ventas Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Ventas is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Visa and Ventas

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

The idea behind Visa Class A and Ventas 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.