Correlation Between Visa and Blackrock Health

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

Diversification Opportunities for Visa and Blackrock Health

-0.68

Correlation Coefficient

Visa  Blackrock Health

Excellent diversification

The 3 months correlation between Visa and Blackrock is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Blackrock Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Health Sciences 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 Blackrock Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Health Sciences has no effect on the direction of Visa i.e., Visa and Blackrock Health go up and down completely randomly.

Pair Corralation between Visa and Blackrock Health

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.26 times more return on investment than Blackrock Health. However, Visa is 1.26 times more volatile than Blackrock Health Sciences. It trades about 0.33 of its potential returns per unit of risk. Blackrock Health Sciences is currently generating about 0.02 per unit of risk. If you would invest  28,960  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  2,510  from holding Visa Class A or generate 8.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Blackrock Health Sciences

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Blackrock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Visa Class A and Blackrock Health Sciences 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.