Correlation Between Visa and WisdomTree Corporate

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

Diversification Opportunities for Visa and WisdomTree Corporate

0.22

Correlation Coefficient

Visa  WisdomTree Corporate

Modest diversification

The 3 months correlation between Visa and WisdomTree is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and WisdomTree Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Corporate Bond 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 WisdomTree Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Corporate Bond has no effect on the direction of Visa i.e., Visa and WisdomTree Corporate go up and down completely randomly.

Pair Corralation between Visa and WisdomTree Corporate

Taking into account the 90-day investment horizon Visa Class A is expected to generate 3.55 times more return on investment than WisdomTree Corporate. However, Visa is 3.55 times more volatile than WisdomTree Corporate Bond. It trades about 0.13 of its potential returns per unit of risk. WisdomTree Corporate Bond is currently generating about 0.11 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  2,606  from holding Visa Class A or generate 8.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

Visa Class A  vs.  WisdomTree Corporate Bond

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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 April 2025.

WisdomTree Corporate Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Corporate Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, WisdomTree Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and WisdomTree Corporate

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

The idea behind Visa Class A and WisdomTree Corporate Bond 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.