Correlation Between Visa and HubSpot

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

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

Diversification Opportunities for Visa and HubSpot

0.89

Correlation Coefficient

Visa  HubSpot

Very poor diversification

The 3 months correlation between Visa and HubSpot is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and HubSpot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HubSpot and Visa 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 Visa Class A are associated (or correlated) with HubSpot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HubSpot has no effect on the direction of Visa i.e., Visa and HubSpot go up and down completely randomly.

Pair Corralation between Visa and HubSpot

Taking into account the 90-day investment horizon Visa is expected to generate 3.13 times less return on investment than HubSpot. But when comparing it to its historical volatility, Visa Class A is 2.66 times less risky than HubSpot. It trades about 0.35 of its potential returns per unit of risk. HubSpot is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  51,180  in HubSpot on September 1, 2024 and sell it today you would earn a total of  16,900  from holding HubSpot or generate 33.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	91.3%
Values	Daily Returns

Visa Class A  vs.  HubSpot

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

HubSpot

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HubSpot are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HubSpot reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and HubSpot

The main advantage of trading using opposite Visa and HubSpot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, HubSpot 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 HubSpot will offset losses from the drop in HubSpot's long position.

The idea behind Visa Class A and HubSpot 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.