Correlation Between Westwood Holdings and Visa

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

By analyzing existing cross correlation between Westwood Holdings Group and Visa Class A, you can compare the effects of market volatilities on Westwood Holdings and Visa 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 Westwood Holdings with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Holdings and Visa.

Diversification Opportunities for Westwood Holdings and Visa

0.74

Correlation Coefficient

Westwood Holdings  Visa

Poor diversification

The 3 months correlation between Westwood and Visa is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Holdings Group and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Westwood Holdings 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 Westwood Holdings Group are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Westwood Holdings i.e., Westwood Holdings and Visa go up and down completely randomly.

Pair Corralation between Westwood Holdings and Visa

Considering the 90-day investment horizon Westwood Holdings Group is expected to generate 2.12 times more return on investment than Visa. However, Westwood Holdings is 2.12 times more volatile than Visa Class A. It trades about 0.1 of its potential returns per unit of risk. Visa Class A is currently generating about 0.11 per unit of risk. If you would invest  1,415  in Westwood Holdings Group on December 26, 2024 and sell it today you would earn a total of  199.00  from holding Westwood Holdings Group or generate 14.06% return on investment over 90 days.

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

Westwood Holdings Group  vs.  Visa Class A

Westwood Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Holdings Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Westwood Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

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 April 2025.

Pair Trading with Westwood Holdings and Visa

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

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