Correlation Between Visa and Income Fund

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

Diversification Opportunities for Visa and Income Fund

-0.6

Correlation Coefficient

Visa  Income Fund

Excellent diversification

The 3 months correlation between Visa and Income is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Income Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Class 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Class has no effect on the direction of Visa i.e., Visa and Income Fund go up and down completely randomly.

Pair Corralation between Visa and Income Fund

Taking into account the 90-day investment horizon Visa Class A is expected to generate 4.11 times more return on investment than Income Fund. However, Visa is 4.11 times more volatile than Income Fund Class. It trades about 0.12 of its potential returns per unit of risk. Income Fund Class is currently generating about -0.09 per unit of risk. If you would invest  28,482  in Visa Class A on September 12, 2024 and sell it today you would earn a total of  2,756  from holding Visa Class A or generate 9.68% 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.  Income Fund Class

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Income Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Income Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Income Fund 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 Income Fund

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

The idea behind Visa Class A and Income Fund Class 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.