Correlation Between Visa and Decision Diagnostics

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

Diversification Opportunities for Visa and Decision Diagnostics

0.0

Correlation Coefficient

Visa  Decision Diagnostics

Pay attention - limited upside

The 3 months correlation between Visa and Decision is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Decision Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decision Diagnostics 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 Decision Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decision Diagnostics has no effect on the direction of Visa i.e., Visa and Decision Diagnostics go up and down completely randomly.

Pair Corralation between Visa and Decision Diagnostics

If you would invest  27,995  in Visa Class A on September 4, 2024 and sell it today you would earn a total of  3,670  from holding Visa Class A or generate 13.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Decision Diagnostics

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Decision Diagnostics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decision Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Decision Diagnostics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and Decision Diagnostics

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

The idea behind Visa Class A and Decision Diagnostics 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.