Correlation Between Visa and CF Acquisition

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

Diversification Opportunities for Visa and CF Acquisition

0.02

Correlation Coefficient

Visa  CF Acquisition

Significant diversification

The 3 months correlation between Visa and CFIVU is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition Corp 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 CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition Corp has no effect on the direction of Visa i.e., Visa and CF Acquisition go up and down completely randomly.

Pair Corralation between Visa and CF Acquisition

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.1 times more return on investment than CF Acquisition. However, Visa is 1.1 times more volatile than CF Acquisition Corp. It trades about 0.09 of its potential returns per unit of risk. CF Acquisition Corp is currently generating about 0.03 per unit of risk. If you would invest  20,456  in Visa Class A on September 20, 2024 and sell it today you would earn a total of  11,123  from holding Visa Class A or generate 54.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	28.23%
Values	Daily Returns

Visa Class A  vs.  CF Acquisition Corp

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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.

CF Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CF Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and CF Acquisition

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

The idea behind Visa Class A and CF Acquisition Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.