Correlation Between Global Star and Visa

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

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

Diversification Opportunities for Global Star and Visa

0.39

Correlation Coefficient

Global Star  Visa

Weak diversification

The 3 months correlation between Global and Visa is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Global Star Acquisition 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 Global Star 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 Global Star Acquisition 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 Global Star i.e., Global Star and Visa go up and down completely randomly.

Pair Corralation between Global Star and Visa

Assuming the 90 days horizon Global Star Acquisition is expected to under-perform the Visa. But the stock apears to be less risky and, when comparing its historical volatility, Global Star Acquisition is 3.38 times less risky than Visa. The stock trades about -0.02 of its potential returns per unit of risk. The Visa Class A is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  27,801  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  3,864  from holding Visa Class A or generate 13.9% return on investment over 90 days.

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

Global Star Acquisition  vs.  Visa Class A

Global Star Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Star Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Global Star is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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 Global Star and Visa

The main advantage of trading using opposite Global Star and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Star 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 Global Star Acquisition 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.