Correlation Between Visa and Calvert Ultra

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

Diversification Opportunities for Visa and Calvert Ultra

0.8

Correlation Coefficient

Visa  Calvert Ultra

Very poor diversification

The 3 months correlation between Visa and Calvert is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Calvert Ultra Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Ultra Short 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 Calvert Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Ultra Short has no effect on the direction of Visa i.e., Visa and Calvert Ultra go up and down completely randomly.

Pair Corralation between Visa and Calvert Ultra

Taking into account the 90-day investment horizon Visa Class A is expected to generate 15.66 times more return on investment than Calvert Ultra. However, Visa is 15.66 times more volatile than Calvert Ultra Short Duration. It trades about 0.11 of its potential returns per unit of risk. Calvert Ultra Short Duration is currently generating about 0.14 per unit of risk. If you would invest  28,992  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  2,431  from holding Visa Class A or generate 8.39% 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.  Calvert Ultra Short Duration

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 weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Calvert Ultra Short

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Ultra Short Duration are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calvert Ultra 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 Calvert Ultra

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

The idea behind Visa Class A and Calvert Ultra Short Duration 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.