Correlation Between Visa and Plaza Retail

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

Diversification Opportunities for Visa and Plaza Retail

-0.43

Correlation Coefficient

Visa  Plaza Retail

Very good diversification

The 3 months correlation between Visa and Plaza is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc CDR and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT 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 Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Visa i.e., Visa and Plaza Retail go up and down completely randomly.

Pair Corralation between Visa and Plaza Retail

Assuming the 90 days trading horizon Visa Inc CDR is expected to generate 1.49 times more return on investment than Plaza Retail. However, Visa is 1.49 times more volatile than Plaza Retail REIT. It trades about 0.11 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about 0.07 per unit of risk. If you would invest  2,573  in Visa Inc CDR on August 31, 2024 and sell it today you would earn a total of  448.00  from holding Visa Inc CDR or generate 17.41% return on investment over 90 days.

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

Visa Inc CDR  vs.  Plaza Retail REIT

Visa Inc CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Visa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Plaza Retail REIT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza Retail REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Plaza Retail is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Plaza Retail

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

The idea behind Visa Inc CDR and Plaza Retail REIT 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 Valuation module to check real value of public entities based on technical and fundamental data.