Correlation Between Netcapital and Visa

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

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

Diversification Opportunities for Netcapital and Visa

0.43

Correlation Coefficient

Netcapital  Visa

Very weak diversification

The 3 months correlation between Netcapital and Visa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital 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 Netcapital 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 Netcapital 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 Netcapital i.e., Netcapital and Visa go up and down completely randomly.

Pair Corralation between Netcapital and Visa

Given the investment horizon of 90 days Netcapital is expected to under-perform the Visa. In addition to that, Netcapital is 5.26 times more volatile than Visa Class A. It trades about -0.05 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.11 per unit of volatility. If you would invest  28,992  in Visa Class A on September 15, 2024 and sell it today you would earn a total of  2,482  from holding Visa Class A or generate 8.56% return on investment over 90 days.

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

Netcapital  vs.  Visa Class A

Netcapital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netcapital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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 Netcapital and Visa

The main advantage of trading using opposite Netcapital and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netcapital 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 Netcapital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.