Correlation Between Visa and Alpha Divisions

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

Diversification Opportunities for Visa and Alpha Divisions

-0.89

Correlation Coefficient

Visa  Alpha Divisions

Pay attention - limited upside

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

Pair Corralation between Visa and Alpha Divisions

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.61 times more return on investment than Alpha Divisions. However, Visa Class A is 1.63 times less risky than Alpha Divisions. It trades about 0.14 of its potential returns per unit of risk. Alpha Divisions PCL is currently generating about -0.15 per unit of risk. If you would invest  31,182  in Visa Class A on September 27, 2024 and sell it today you would earn a total of  883.00  from holding Visa Class A or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Visa Class A  vs.  Alpha Divisions PCL

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.

Alpha Divisions PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Divisions PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Visa and Alpha Divisions

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

The idea behind Visa Class A and Alpha Divisions PCL 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.