Correlation Between BlackRock and Visa

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

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

Diversification Opportunities for BlackRock and Visa

0.89

Correlation Coefficient

BlackRock  Visa

Very poor diversification

The 3 months correlation between BlackRock and Visa is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock 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 BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Visa go up and down completely randomly.

Pair Corralation between BlackRock and Visa

Considering the 90-day investment horizon BlackRock is expected to generate 1.02 times less return on investment than Visa. But when comparing it to its historical volatility, BlackRock is 1.19 times less risky than Visa. It trades about 0.14 of its potential returns per unit of risk. Visa Class A is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  28,808  in Visa Class A on September 23, 2024 and sell it today you would earn a total of  2,963  from holding Visa Class A or generate 10.29% return on investment over 90 days.

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

BlackRock  vs.  Visa Class A

BlackRock

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BlackRock and Visa

The main advantage of trading using opposite BlackRock and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.