Correlation Between Zip Co and Visa

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

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

Diversification Opportunities for Zip Co and Visa

0.65

Correlation Coefficient

Zip Co  Visa

Poor diversification

The 3 months correlation between Zip and Visa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Zip Co Limited 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 Zip Co 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 Zip Co Limited 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 Zip Co i.e., Zip Co and Visa go up and down completely randomly.

Pair Corralation between Zip Co and Visa

Assuming the 90 days horizon Zip Co Limited is expected to generate 3.67 times more return on investment than Visa. However, Zip Co is 3.67 times more volatile than Visa Class A. It trades about 0.14 of its potential returns per unit of risk. Visa Class A is currently generating about 0.16 per unit of risk. If you would invest  157.00  in Zip Co Limited on September 4, 2024 and sell it today you would earn a total of  68.00  from holding Zip Co Limited or generate 43.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Zip Co Limited  vs.  Visa Class A

Zip Co Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zip Co Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zip Co reported solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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 Zip Co and Visa

The main advantage of trading using opposite Zip Co and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zip Co 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 Zip Co Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..