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

-0.41

Correlation Coefficient

Visa  MASSACHUSETTS

Very good diversification

The 3 months correlation between Visa and MASSACHUSETTS is -0.41. 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 Class A is expected to generate 0.67 times more return on investment than MASSACHUSETTS. However, Visa Class A is 1.5 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 0.0 per unit of risk. If you would invest  25,690  in Visa Class A on September 25, 2024 and sell it today you would earn a total of  6,365  from holding Visa Class A or generate 24.78% return on investment 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

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

MASSACHUSETTS INST

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MASSACHUSETTS INST TECHNOLOGY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MASSACHUSETTS is not utilizing all of its potentials. The newest 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.