Correlation Between Visa and Cablevision Holding

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

Diversification Opportunities for Visa and Cablevision Holding

0.88

Correlation Coefficient

Visa  Cablevision Holding

Very poor diversification

The 3 months correlation between Visa and Cablevision is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Cablevision Holding SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cablevision Holding 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 Cablevision Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cablevision Holding has no effect on the direction of Visa i.e., Visa and Cablevision Holding go up and down completely randomly.

Pair Corralation between Visa and Cablevision Holding

Taking into account the 90-day investment horizon Visa is expected to generate 3.99 times less return on investment than Cablevision Holding. But when comparing it to its historical volatility, Visa Class A is 1.71 times less risky than Cablevision Holding. It trades about 0.1 of its potential returns per unit of risk. Cablevision Holding SA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  522,000  in Cablevision Holding SA on September 17, 2024 and sell it today you would earn a total of  192,000  from holding Cablevision Holding SA or generate 36.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Cablevision Holding SA

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.

Cablevision Holding

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cablevision Holding SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Cablevision Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Cablevision Holding

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

The idea behind Visa Class A and Cablevision Holding SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..