Correlation Between Xp and Visa

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

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

Diversification Opportunities for Xp and Visa

-0.77

Correlation Coefficient

Xp  Visa

Pay attention - limited upside

The 3 months correlation between Xp and Visa is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc 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 Xp 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 Xp Inc 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 Xp i.e., Xp and Visa go up and down completely randomly.

Pair Corralation between Xp and Visa

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Visa. In addition to that, Xp is 3.4 times more volatile than Visa Class A. It trades about -0.4 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.08 per unit of volatility. If you would invest  31,319  in Visa Class A on September 24, 2024 and sell it today you would earn a total of  452.00  from holding Visa Class A or generate 1.44% return on investment over 90 days.

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

Xp Inc  vs.  Visa Class A

Xp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Visa Class A

Risk-Adjusted Performance

17 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xp and Visa

The main advantage of trading using opposite Xp and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xp 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 Xp Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.