Correlation Between Visa and Information Services

Can any of the company-specific risk be diversified away by investing in both Visa and Information Services 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 Information Services into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Inc CDR and Information Services, you can compare the effects of market volatilities on Visa and Information Services 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 Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Information Services.

Diversification Opportunities for Visa and Information Services

-0.75

Correlation Coefficient

Visa  Information Services

Pay attention - limited upside

The 3 months correlation between Visa and Information is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc CDR and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Inc CDR are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Visa i.e., Visa and Information Services go up and down completely randomly.

Pair Corralation between Visa and Information Services

Assuming the 90 days trading horizon Visa Inc CDR is expected to generate 0.93 times more return on investment than Information Services. However, Visa Inc CDR is 1.07 times less risky than Information Services. It trades about 0.19 of its potential returns per unit of risk. Information Services is currently generating about -0.07 per unit of risk. If you would invest  2,697  in Visa Inc CDR on October 23, 2024 and sell it today you would earn a total of  353.00  from holding Visa Inc CDR or generate 13.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Visa Inc CDR  vs.  Information Services

Visa Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Visa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Information Services 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 Information Services

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

The idea behind Visa Inc CDR and Information Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.