Correlation Between Visa and Aerospace Industrial

Can any of the company-specific risk be diversified away by investing in both Visa and Aerospace Industrial 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 Aerospace Industrial 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 Aerospace Industrial Development, you can compare the effects of market volatilities on Visa and Aerospace Industrial 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 Aerospace Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Aerospace Industrial.

Diversification Opportunities for Visa and Aerospace Industrial

-0.77

Correlation Coefficient

Visa  Aerospace Industrial

Pay attention - limited upside

The 3 months correlation between Visa and Aerospace is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Aerospace Industrial Developme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Industrial 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 Aerospace Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Industrial has no effect on the direction of Visa i.e., Visa and Aerospace Industrial go up and down completely randomly.

Pair Corralation between Visa and Aerospace Industrial

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than Aerospace Industrial. However, Visa Class A is 1.79 times less risky than Aerospace Industrial. It trades about 0.09 of its potential returns per unit of risk. Aerospace Industrial Development is currently generating about -0.03 per unit of risk. If you would invest  23,713  in Visa Class A on September 12, 2024 and sell it today you would earn a total of  7,692  from holding Visa Class A or generate 32.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.89%
Values	Daily Returns

Visa Class A  vs.  Aerospace Industrial Developme

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 weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aerospace Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerospace Industrial Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Visa and Aerospace Industrial

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

The idea behind Visa Class A and Aerospace Industrial Development 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.