Correlation Between Visa and CoStar

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

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

Diversification Opportunities for Visa and CoStar

0.81

Correlation Coefficient

Visa  CoStar

Very poor diversification

The 3 months correlation between Visa and CoStar is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and CoStar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoStar 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 Inc are associated (or correlated) with CoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoStar Group has no effect on the direction of Visa i.e., Visa and CoStar go up and down completely randomly.

Pair Corralation between Visa and CoStar

Assuming the 90 days trading horizon Visa is expected to generate 1.46 times less return on investment than CoStar. But when comparing it to its historical volatility, Visa Inc is 1.48 times less risky than CoStar. It trades about 0.2 of its potential returns per unit of risk. CoStar Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  414.00  in CoStar Group on September 17, 2024 and sell it today you would earn a total of  38.00  from holding CoStar Group or generate 9.18% return on investment over 90 days.

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

Visa Inc  vs.  CoStar Group

Visa Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Visa sustained solid returns over the last few months and may actually be approaching a breakup point.

CoStar Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, CoStar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and CoStar

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

The idea behind Visa Inc and CoStar Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.