Correlation Between Visa and Templeton World

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

Diversification Opportunities for Visa and Templeton World

0.38

Correlation Coefficient

Visa  Templeton World

Weak diversification

The 3 months correlation between Visa and Templeton is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Templeton World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton World 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 Templeton World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton World has no effect on the direction of Visa i.e., Visa and Templeton World go up and down completely randomly.

Pair Corralation between Visa and Templeton World

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.53 times more return on investment than Templeton World. However, Visa is 1.53 times more volatile than Templeton World Fund. It trades about 0.4 of its potential returns per unit of risk. Templeton World Fund is currently generating about 0.04 per unit of risk. If you would invest  28,134  in Visa Class A on August 30, 2024 and sell it today you would earn a total of  3,336  from holding Visa Class A or generate 11.86% return on investment over 90 days.

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

Visa Class A  vs.  Templeton World Fund

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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.

Templeton World

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton World Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Templeton World 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 Templeton World

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

The idea behind Visa Class A and Templeton World Fund 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.