Correlation Between Visa and First Asset

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

Diversification Opportunities for Visa and First Asset

0.59

Correlation Coefficient

Visa  First Asset

Very weak diversification

The 3 months correlation between Visa and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and First Asset Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Asset Morningstar 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 First Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Asset Morningstar has no effect on the direction of Visa i.e., Visa and First Asset go up and down completely randomly.

Pair Corralation between Visa and First Asset

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.85 times more return on investment than First Asset. However, Visa is 1.85 times more volatile than First Asset Morningstar. It trades about 0.11 of its potential returns per unit of risk. First Asset Morningstar is currently generating about 0.14 per unit of risk. If you would invest  28,992  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  2,431  from holding Visa Class A or generate 8.39% return on investment over 90 days.

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

Visa Class A  vs.  First Asset Morningstar

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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 January 2025.

First Asset Morningstar

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Morningstar are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, First Asset is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and First Asset

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

The idea behind Visa Class A and First Asset Morningstar 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.