Correlation Between Visa and Growth Opportunities

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

Diversification Opportunities for Visa and Growth Opportunities

0.82

Correlation Coefficient

Visa  Growth Opportunities

Very poor diversification

The 3 months correlation between Visa and Growth is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Growth Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Opportunities 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 Growth Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Opportunities has no effect on the direction of Visa i.e., Visa and Growth Opportunities go up and down completely randomly.

Pair Corralation between Visa and Growth Opportunities

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.03 times more return on investment than Growth Opportunities. However, Visa is 1.03 times more volatile than Growth Opportunities Fund. It trades about 0.11 of its potential returns per unit of risk. Growth Opportunities Fund is currently generating about 0.05 per unit of risk. If you would invest  27,414  in Visa Class A on September 19, 2024 and sell it today you would earn a total of  4,737  from holding Visa Class A or generate 17.28% return on investment over 90 days.

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

Visa Class A  vs.  Growth Opportunities Fund

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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.

Growth Opportunities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Growth Opportunities 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 Growth Opportunities

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

The idea behind Visa Class A and Growth Opportunities 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.