Correlation Between Visa and Stet Intermediate

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

Diversification Opportunities for Visa and Stet Intermediate

0.06

Correlation Coefficient

Visa  Stet Intermediate

Significant diversification

The 3 months correlation between Visa and Stet is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Stet Intermediate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet Intermediate Term 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 Stet Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet Intermediate Term has no effect on the direction of Visa i.e., Visa and Stet Intermediate go up and down completely randomly.

Pair Corralation between Visa and Stet Intermediate

Taking into account the 90-day investment horizon Visa Class A is expected to generate 6.7 times more return on investment than Stet Intermediate. However, Visa is 6.7 times more volatile than Stet Intermediate Term. It trades about 0.1 of its potential returns per unit of risk. Stet Intermediate Term is currently generating about 0.08 per unit of risk. If you would invest  27,011  in Visa Class A on September 15, 2024 and sell it today you would earn a total of  4,463  from holding Visa Class A or generate 16.52% return on investment over 90 days.

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

Visa Class A  vs.  Stet Intermediate Term

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stet Intermediate Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stet Intermediate Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Stet Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Stet Intermediate

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

The idea behind Visa Class A and Stet Intermediate Term 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.