Correlation Between Visa and LatAmGrowth SPAC

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

Diversification Opportunities for Visa and LatAmGrowth SPAC

0.62

Correlation Coefficient

Visa  LatAmGrowth SPAC

Poor diversification

The 3 months correlation between Visa and LatAmGrowth is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and LatAmGrowth SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LatAmGrowth SPAC 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 LatAmGrowth SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LatAmGrowth SPAC has no effect on the direction of Visa i.e., Visa and LatAmGrowth SPAC go up and down completely randomly.

Pair Corralation between Visa and LatAmGrowth SPAC

Taking into account the 90-day investment horizon Visa Class A is expected to generate 16.16 times more return on investment than LatAmGrowth SPAC. However, Visa is 16.16 times more volatile than LatAmGrowth SPAC. It trades about 0.16 of its potential returns per unit of risk. LatAmGrowth SPAC is currently generating about 0.29 per unit of risk. If you would invest  27,801  in Visa Class A on September 2, 2024 and sell it today you would earn a total of  3,707  from holding Visa Class A or generate 13.33% 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.  LatAmGrowth SPAC

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.

LatAmGrowth SPAC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LatAmGrowth SPAC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LatAmGrowth SPAC 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 LatAmGrowth SPAC

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

The idea behind Visa Class A and LatAmGrowth SPAC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.