Correlation Between Visa and Woolworths Group

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

Diversification Opportunities for Visa and Woolworths Group

-0.82

Correlation Coefficient

Visa  Woolworths Group

Pay attention - limited upside

The 3 months correlation between Visa and Woolworths is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group 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 Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of Visa i.e., Visa and Woolworths Group go up and down completely randomly.

Pair Corralation between Visa and Woolworths Group

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.88 times more return on investment than Woolworths Group. However, Visa Class A is 1.14 times less risky than Woolworths Group. It trades about 0.14 of its potential returns per unit of risk. Woolworths Group Limited is currently generating about -0.12 per unit of risk. If you would invest  28,014  in Visa Class A on October 13, 2024 and sell it today you would earn a total of  2,757  from holding Visa Class A or generate 9.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Visa Class A  vs.  Woolworths Group Limited

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

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 weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Woolworths Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Visa and Woolworths Group

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

The idea behind Visa Class A and Woolworths Group Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.