Correlation Between Visa and ESE Entertainment

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

Diversification Opportunities for Visa and ESE Entertainment

-0.87

Correlation Coefficient

Visa  ESE Entertainment

Pay attention - limited upside

The 3 months correlation between Visa and ESE is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment 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 ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of Visa i.e., Visa and ESE Entertainment go up and down completely randomly.

Pair Corralation between Visa and ESE Entertainment

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.19 times more return on investment than ESE Entertainment. However, Visa Class A is 5.2 times less risky than ESE Entertainment. It trades about 0.11 of its potential returns per unit of risk. ESE Entertainment is currently generating about -0.12 per unit of risk. If you would invest  28,808  in Visa Class A on September 21, 2024 and sell it today you would earn a total of  2,680  from holding Visa Class A or generate 9.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  ESE Entertainment

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.

ESE Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESE Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Visa and ESE Entertainment

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

The idea behind Visa Class A and ESE Entertainment 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.