Correlation Between Visa and RB Food

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

Diversification Opportunities for Visa and RB Food

-0.04

Correlation Coefficient

Visa  RB Food

Good diversification

The 3 months correlation between Visa and RBF is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and RB Food Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Food Supply 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 RB Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Food Supply has no effect on the direction of Visa i.e., Visa and RB Food go up and down completely randomly.

Pair Corralation between Visa and RB Food

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.45 times more return on investment than RB Food. However, Visa Class A is 2.2 times less risky than RB Food. It trades about 0.15 of its potential returns per unit of risk. RB Food Supply is currently generating about 0.04 per unit of risk. If you would invest  27,809  in Visa Class A on September 5, 2024 and sell it today you would earn a total of  3,492  from holding Visa Class A or generate 12.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Visa Class A  vs.  RB Food Supply

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.

RB Food Supply

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RB Food Supply are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, RB Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and RB Food

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

The idea behind Visa Class A and RB Food Supply 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.