Correlation Between Visa and FIRST NATIONAL

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

Diversification Opportunities for Visa and FIRST NATIONAL

0.8

Correlation Coefficient

Visa  FIRST NATIONAL

Very poor diversification

The 3 months correlation between Visa and FIRST is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and FIRST NATIONAL FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST NATIONAL FIN 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 FIRST NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST NATIONAL FIN has no effect on the direction of Visa i.e., Visa and FIRST NATIONAL go up and down completely randomly.

Pair Corralation between Visa and FIRST NATIONAL

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.48 times more return on investment than FIRST NATIONAL. However, Visa Class A is 2.1 times less risky than FIRST NATIONAL. It trades about 0.07 of its potential returns per unit of risk. FIRST NATIONAL FIN is currently generating about -0.25 per unit of risk. If you would invest  31,319  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  403.00  from holding Visa Class A or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  FIRST NATIONAL FIN

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

FIRST NATIONAL FIN

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST NATIONAL FIN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FIRST NATIONAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and FIRST NATIONAL

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

The idea behind Visa Class A and FIRST NATIONAL FIN 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.