Correlation Between Visa and MASSACHUSETTS

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

Diversification Opportunities for Visa and MASSACHUSETTS

-0.47

Correlation Coefficient

Visa  MASSACHUSETTS

Very good diversification

The 3 months correlation between Visa and MASSACHUSETTS is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and MASSACHUSETTS INST TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASSACHUSETTS INST 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 MASSACHUSETTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASSACHUSETTS INST has no effect on the direction of Visa i.e., Visa and MASSACHUSETTS go up and down completely randomly.

Pair Corralation between Visa and MASSACHUSETTS

Taking into account the 90-day investment horizon Visa is expected to generate 21.77 times less return on investment than MASSACHUSETTS. But when comparing it to its historical volatility, Visa Class A is 46.43 times less risky than MASSACHUSETTS. It trades about 0.09 of its potential returns per unit of risk. MASSACHUSETTS INST TECHNOLOGY is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,595  in MASSACHUSETTS INST TECHNOLOGY on September 20, 2024 and sell it today you would lose (504.00) from holding MASSACHUSETTS INST TECHNOLOGY or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.94%
Values	Daily Returns

Visa Class A  vs.  MASSACHUSETTS INST TECHNOLOGY

Visa Class A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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.

MASSACHUSETTS INST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MASSACHUSETTS INST TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MASSACHUSETTS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and MASSACHUSETTS

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

The idea behind Visa Class A and MASSACHUSETTS INST TECHNOLOGY 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.