Correlation Between Charles Schwab and Visa

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

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

Diversification Opportunities for Charles Schwab and Visa

0.91

Correlation Coefficient

Charles Schwab  Visa

Almost no diversification

The 3 months correlation between Charles and Visa is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Charles Schwab 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 Charles Schwab 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 Charles Schwab 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 Charles Schwab i.e., Charles Schwab and Visa go up and down completely randomly.

Pair Corralation between Charles Schwab and Visa

Given the investment horizon of 90 days Charles Schwab Corp is expected to generate 1.6 times more return on investment than Visa. However, Charles Schwab is 1.6 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 0.22 per unit of risk. If you would invest  6,436  in Charles Schwab Corp on September 24, 2024 and sell it today you would earn a total of  1,035  from holding Charles Schwab Corp or generate 16.08% return on investment over 90 days.

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

Charles Schwab Corp  vs.  Visa Class A

Charles Schwab Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charles Schwab Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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 Charles Schwab and Visa

The main advantage of trading using opposite Charles Schwab and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles Schwab 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 Charles Schwab 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.