Correlation Between Visa and Aristotle Value

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

Diversification Opportunities for Visa and Aristotle Value

0.25

Correlation Coefficient

Visa  Aristotle Value

Modest diversification

The 3 months correlation between Visa and Aristotle is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Aristotle Value Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Value Equity 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 Aristotle Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Value Equity has no effect on the direction of Visa i.e., Visa and Aristotle Value go up and down completely randomly.

Pair Corralation between Visa and Aristotle Value

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.86 times more return on investment than Aristotle Value. However, Visa Class A is 1.16 times less risky than Aristotle Value. It trades about 0.06 of its potential returns per unit of risk. Aristotle Value Equity is currently generating about -0.34 per unit of risk. If you would invest  31,185  in Visa Class A on September 20, 2024 and sell it today you would earn a total of  303.00  from holding Visa Class A or generate 0.97% return on investment over 90 days.

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

Visa Class A  vs.  Aristotle Value Equity

Visa Class A

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aristotle Value Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle Value Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aristotle Value 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 Aristotle Value

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

The idea behind Visa Class A and Aristotle Value Equity 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.