Correlation Between Visa and Spectra7 Microsystems

Can any of the company-specific risk be diversified away by investing in both Visa and Spectra7 Microsystems 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 Spectra7 Microsystems 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 Spectra7 Microsystems, you can compare the effects of market volatilities on Visa and Spectra7 Microsystems 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 Spectra7 Microsystems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Spectra7 Microsystems.

Diversification Opportunities for Visa and Spectra7 Microsystems

0.29

Correlation Coefficient

Visa  Spectra7 Microsystems

Modest diversification

The 3 months correlation between Visa and Spectra7 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Spectra7 Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra7 Microsystems 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 Spectra7 Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra7 Microsystems has no effect on the direction of Visa i.e., Visa and Spectra7 Microsystems go up and down completely randomly.

Pair Corralation between Visa and Spectra7 Microsystems

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.08 times more return on investment than Spectra7 Microsystems. However, Visa Class A is 11.85 times less risky than Spectra7 Microsystems. It trades about 0.07 of its potential returns per unit of risk. Spectra7 Microsystems is currently generating about -0.12 per unit of risk. If you would invest  31,319  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  403.00  from holding Visa Class A or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Visa Class A  vs.  Spectra7 Microsystems

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.

Spectra7 Microsystems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spectra7 Microsystems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Spectra7 Microsystems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Spectra7 Microsystems

The main advantage of trading using opposite Visa and Spectra7 Microsystems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Spectra7 Microsystems 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 Spectra7 Microsystems will offset losses from the drop in Spectra7 Microsystems' long position.

The idea behind Visa Class A and Spectra7 Microsystems 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..