Correlation Between Visa and SIX

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

Diversification Opportunities for Visa and SIX

0.81

Correlation Coefficient

Visa  SIX

Very poor diversification

The 3 months correlation between Visa and SIX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIX 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 SIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIX has no effect on the direction of Visa i.e., Visa and SIX go up and down completely randomly.

Pair Corralation between Visa and SIX

Taking into account the 90-day investment horizon Visa is expected to generate 4.05 times less return on investment than SIX. But when comparing it to its historical volatility, Visa Class A is 2.84 times less risky than SIX. It trades about 0.35 of its potential returns per unit of risk. SIX is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  2.54  in SIX on September 1, 2024 and sell it today you would earn a total of  1.08  from holding SIX or generate 42.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  SIX

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

SIX

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SIX are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SIX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and SIX

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

The idea behind Visa Class A and SIX 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.