Correlation Between Visa and Wipro

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

Diversification Opportunities for Visa and Wipro

0.89

Correlation Coefficient

Visa  Wipro

Very poor diversification

The 3 months correlation between Visa and Wipro is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Wipro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro 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 Wipro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro has no effect on the direction of Visa i.e., Visa and Wipro go up and down completely randomly.

Pair Corralation between Visa and Wipro

Taking into account the 90-day investment horizon Visa is expected to generate 4.87 times less return on investment than Wipro. But when comparing it to its historical volatility, Visa Class A is 2.56 times less risky than Wipro. It trades about 0.13 of its potential returns per unit of risk. Wipro is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Wipro on September 19, 2024 and sell it today you would earn a total of  32.00  from holding Wipro or generate 10.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Wipro

Visa Class A

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wipro

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wipro unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Wipro

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

The idea behind Visa Class A and Wipro 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.