Correlation Between Visa and Neutra Corp

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

Diversification Opportunities for Visa and Neutra Corp

-0.34

Correlation Coefficient

Visa  Neutra Corp

Very good diversification

The 3 months correlation between Visa and Neutra is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Neutra Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neutra 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 Neutra Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neutra Corp has no effect on the direction of Visa i.e., Visa and Neutra Corp go up and down completely randomly.

Pair Corralation between Visa and Neutra Corp

Taking into account the 90-day investment horizon Visa is expected to generate 8.22 times less return on investment than Neutra Corp. But when comparing it to its historical volatility, Visa Class A is 19.77 times less risky than Neutra Corp. It trades about 0.15 of its potential returns per unit of risk. Neutra Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Neutra Corp on September 5, 2024 and sell it today you would lose (0.01) from holding Neutra Corp or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Neutra Corp

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Neutra Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neutra Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Neutra Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Neutra Corp

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

The idea behind Visa Class A and Neutra 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.