Correlation Between Visa and Signify Health

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

Diversification Opportunities for Visa and Signify Health

0.39

Correlation Coefficient

Visa  Signify Health

Weak diversification

The 3 months correlation between Visa and Signify is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Signify Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signify Health 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 Signify Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signify Health has no effect on the direction of Visa i.e., Visa and Signify Health go up and down completely randomly.

Pair Corralation between Visa and Signify Health

If you would invest  22,902  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  8,820  from holding Visa Class A or generate 38.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.32%
Values	Daily Returns

Visa Class A  vs.  Signify Health

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

Signify Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signify Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Signify Health is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Signify Health

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

The idea behind Visa Class A and Signify Health 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.