Correlation Between Visa and IShares Core

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

Diversification Opportunities for Visa and IShares Core

0.05

Correlation Coefficient

Visa  IShares Core

Significant diversification

The 3 months correlation between Visa and IShares is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Visa i.e., Visa and IShares Core go up and down completely randomly.

Pair Corralation between Visa and IShares Core

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.2 times more return on investment than IShares Core. However, Visa is 1.2 times more volatile than iShares Core SP. It trades about 0.17 of its potential returns per unit of risk. iShares Core SP is currently generating about -0.06 per unit of risk. If you would invest  31,478  in Visa Class A on December 28, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

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

Visa Class A  vs.  iShares Core SP

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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.

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and IShares Core

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

The idea behind Visa Class A and iShares Core SP 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.