Correlation Between Visa and Eagle Capital

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

Diversification Opportunities for Visa and Eagle Capital

0.73

Correlation Coefficient

Visa  Eagle Capital

Poor diversification

The 3 months correlation between Visa and Eagle is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Eagle Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Capital Apprec 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 Eagle Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Capital Apprec has no effect on the direction of Visa i.e., Visa and Eagle Capital go up and down completely randomly.

Pair Corralation between Visa and Eagle Capital

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.98 times more return on investment than Eagle Capital. However, Visa Class A is 1.02 times less risky than Eagle Capital. It trades about 0.33 of its potential returns per unit of risk. Eagle Capital Appreciation is currently generating about 0.12 per unit of risk. If you would invest  28,960  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  2,510  from holding Visa Class A or generate 8.67% return on investment over 90 days.

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

Visa Class A  vs.  Eagle Capital Appreciation

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.

Eagle Capital Apprec

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Capital Appreciation are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Eagle Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Visa and Eagle Capital

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

The idea behind Visa Class A and Eagle Capital Appreciation 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.