Correlation Between Visa and Subaru Corp

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

Diversification Opportunities for Visa and Subaru Corp

-0.54

Correlation Coefficient

Visa  Subaru Corp

Excellent diversification

The 3 months correlation between Visa and Subaru is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Subaru Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subaru Corp 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 Subaru Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subaru Corp has no effect on the direction of Visa i.e., Visa and Subaru Corp go up and down completely randomly.

Pair Corralation between Visa and Subaru Corp

Taking into account the 90-day investment horizon Visa is expected to generate 3.54 times less return on investment than Subaru Corp. But when comparing it to its historical volatility, Visa Class A is 8.35 times less risky than Subaru Corp. It trades about 0.14 of its potential returns per unit of risk. Subaru Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,578  in Subaru Corp on September 15, 2024 and sell it today you would earn a total of  62.00  from holding Subaru Corp or generate 3.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Subaru Corp

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.

Subaru Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Subaru Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Subaru Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and Subaru Corp

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

The idea behind Visa Class A and Subaru Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.