Correlation Between Medallion Financial and Visa

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

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

Diversification Opportunities for Medallion Financial and Visa

0.84

Correlation Coefficient

Medallion Financial  Visa

Very poor diversification

The 3 months correlation between Medallion and Visa is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Medallion Financial Corp 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 Medallion Financial 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 Medallion Financial Corp 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 Medallion Financial i.e., Medallion Financial and Visa go up and down completely randomly.

Pair Corralation between Medallion Financial and Visa

Given the investment horizon of 90 days Medallion Financial Corp is expected to generate 1.32 times more return on investment than Visa. However, Medallion Financial is 1.32 times more volatile than Visa Class A. It trades about 0.28 of its potential returns per unit of risk. Visa Class A is currently generating about 0.12 per unit of risk. If you would invest  769.00  in Medallion Financial Corp on September 18, 2024 and sell it today you would earn a total of  253.00  from holding Medallion Financial Corp or generate 32.9% return on investment over 90 days.

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

Medallion Financial Corp  vs.  Visa Class A

Medallion Financial Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Financial Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Medallion Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Medallion Financial and Visa

The main advantage of trading using opposite Medallion Financial and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medallion Financial 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 Medallion Financial Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.