Correlation Between Visa and UST Inc

Can any of the company-specific risk be diversified away by investing in both Visa and UST Inc 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 UST Inc 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 ProShares Ultra 7 10, you can compare the effects of market volatilities on Visa and UST Inc 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 UST Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and UST Inc.

Diversification Opportunities for Visa and UST Inc

-0.68

Correlation Coefficient

Visa  UST Inc

Excellent diversification

The 3 months correlation between Visa and UST is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ProShares Ultra 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra 7 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 UST Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra 7 has no effect on the direction of Visa i.e., Visa and UST Inc go up and down completely randomly.

Pair Corralation between Visa and UST Inc

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.67 times more return on investment than UST Inc. However, Visa is 1.67 times more volatile than ProShares Ultra 7 10. It trades about 0.17 of its potential returns per unit of risk. ProShares Ultra 7 10 is currently generating about -0.09 per unit of risk. If you would invest  27,801  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  3,864  from holding Visa Class A or generate 13.9% return on investment over 90 days.

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

Visa Class A  vs.  ProShares Ultra 7 10

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.

ProShares Ultra 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra 7 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, UST Inc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and UST Inc

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

The idea behind Visa Class A and ProShares Ultra 7 10 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.