Correlation Between Visa and Cboe Vest

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

Diversification Opportunities for Visa and Cboe Vest

0.85

Correlation Coefficient

Visa  Cboe Vest

Very poor diversification

The 3 months correlation between Visa and Cboe is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Cboe Vest Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Vest Large 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 Cboe Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Vest Large has no effect on the direction of Visa i.e., Visa and Cboe Vest go up and down completely randomly.

Pair Corralation between Visa and Cboe Vest

Taking into account the 90-day investment horizon Visa is expected to generate 1.11 times less return on investment than Cboe Vest. In addition to that, Visa is 4.29 times more volatile than Cboe Vest Large. It trades about 0.11 of its total potential returns per unit of risk. Cboe Vest Large is currently generating about 0.51 per unit of volatility. If you would invest  1,964  in Cboe Vest Large on September 16, 2024 and sell it today you would earn a total of  37.00  from holding Cboe Vest Large or generate 1.88% return on investment over 90 days.

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

Visa Class A  vs.  Cboe Vest Large

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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.

Cboe Vest Large

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cboe Vest Large are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cboe Vest 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 Cboe Vest

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

The idea behind Visa Class A and Cboe Vest Large 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.