Correlation Between Visa and Invesco Quality

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

Diversification Opportunities for Visa and Invesco Quality

-0.68

Correlation Coefficient

Visa  Invesco Quality

Excellent diversification

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

Pair Corralation between Visa and Invesco Quality

Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.98 times more return on investment than Invesco Quality. However, Visa is 2.98 times more volatile than Invesco Quality Income. It trades about 0.14 of its potential returns per unit of risk. Invesco Quality Income is currently generating about -0.24 per unit of risk. If you would invest  31,182  in Visa Class A on September 27, 2024 and sell it today you would earn a total of  883.00  from holding Visa Class A or generate 2.83% 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.  Invesco Quality Income

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) 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.

Invesco Quality Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Quality Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Invesco Quality 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 Invesco Quality

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

The idea behind Visa Class A and Invesco Quality Income 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.