Correlation Between Visa and Sun Communities

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

Diversification Opportunities for Visa and Sun Communities

-0.32

Correlation Coefficient

Visa  Sun Communities

Very good diversification

The 3 months correlation between Visa and Sun is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities 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 Sun Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Communities has no effect on the direction of Visa i.e., Visa and Sun Communities go up and down completely randomly.

Pair Corralation between Visa and Sun Communities

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.63 times more return on investment than Sun Communities. However, Visa Class A is 1.58 times less risky than Sun Communities. It trades about 0.23 of its potential returns per unit of risk. Sun Communities is currently generating about -0.03 per unit of risk. If you would invest  27,226  in Visa Class A on September 24, 2024 and sell it today you would earn a total of  4,545  from holding Visa Class A or generate 16.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Visa Class A  vs.  Sun Communities

Visa Class A

Risk-Adjusted Performance

17 of 100

OK

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.

Sun Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sun Communities 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 Sun Communities

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

The idea behind Visa Class A and Sun Communities 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .