Correlation Between Visa and Real Brands

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

Diversification Opportunities for Visa and Real Brands

-0.7

Correlation Coefficient

Visa  Real Brands

Excellent diversification

The 3 months correlation between Visa and Real is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Real Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Brands 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 Real Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Brands has no effect on the direction of Visa i.e., Visa and Real Brands go up and down completely randomly.

Pair Corralation between Visa and Real Brands

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.02 times more return on investment than Real Brands. However, Visa Class A is 46.26 times less risky than Real Brands. It trades about 0.05 of its potential returns per unit of risk. Real Brands is currently generating about -0.14 per unit of risk. If you would invest  31,032  in Visa Class A on September 12, 2024 and sell it today you would earn a total of  206.00  from holding Visa Class A or generate 0.66% return on investment over 90 days.

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

Visa Class A  vs.  Real Brands

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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.

Real Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Visa and Real Brands

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

The idea behind Visa Class A and Real Brands 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.