Correlation Between Visa and Overseas Portfolio

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

Diversification Opportunities for Visa and Overseas Portfolio

-0.82

Correlation Coefficient

Visa  Overseas Portfolio

Pay attention - limited upside

The 3 months correlation between Visa and Overseas is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Overseas Portfolio Institution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overseas Portfolio 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 Overseas Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overseas Portfolio has no effect on the direction of Visa i.e., Visa and Overseas Portfolio go up and down completely randomly.

Pair Corralation between Visa and Overseas Portfolio

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.46 times more return on investment than Overseas Portfolio. However, Visa is 1.46 times more volatile than Overseas Portfolio Institutional. It trades about 0.22 of its potential returns per unit of risk. Overseas Portfolio Institutional is currently generating about -0.13 per unit of risk. If you would invest  27,442  in Visa Class A on September 30, 2024 and sell it today you would earn a total of  4,424  from holding Visa Class A or generate 16.12% 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.  Overseas Portfolio Institution

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

Overseas Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overseas Portfolio Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Overseas Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Overseas Portfolio

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

The idea behind Visa Class A and Overseas Portfolio Institutional 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.