Correlation Between Visa and Western Asset

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

Diversification Opportunities for Visa and Western Asset

0.94

Correlation Coefficient

Visa  Western Asset

Almost no diversification

The 3 months correlation between Visa and Western is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Western Asset Adjustable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Adjustable 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Adjustable has no effect on the direction of Visa i.e., Visa and Western Asset go up and down completely randomly.

Pair Corralation between Visa and Western Asset

Taking into account the 90-day investment horizon Visa Class A is expected to generate 11.17 times more return on investment than Western Asset. However, Visa is 11.17 times more volatile than Western Asset Adjustable. It trades about 0.08 of its potential returns per unit of risk. Western Asset Adjustable is currently generating about 0.26 per unit of risk. If you would invest  21,523  in Visa Class A on September 29, 2024 and sell it today you would earn a total of  10,343  from holding Visa Class A or generate 48.06% return on investment over 90 days.

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

Visa Class A  vs.  Western Asset Adjustable

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.

Western Asset Adjustable

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Adjustable are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Western Asset

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

The idea behind Visa Class A and Western Asset Adjustable 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.