Correlation Between Visa and Ultimus Managers

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

Diversification Opportunities for Visa and Ultimus Managers

0.63

Correlation Coefficient

Visa  Ultimus Managers

Poor diversification

The 3 months correlation between Visa and Ultimus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Ultimus Managers Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultimus Managers Trust 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 Ultimus Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultimus Managers Trust has no effect on the direction of Visa i.e., Visa and Ultimus Managers go up and down completely randomly.

Pair Corralation between Visa and Ultimus Managers

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.79 times more return on investment than Ultimus Managers. However, Visa is 1.79 times more volatile than Ultimus Managers Trust. It trades about 0.16 of its potential returns per unit of risk. Ultimus Managers Trust is currently generating about 0.15 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  3,707  from holding Visa Class A or generate 13.33% return on investment over 90 days.

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

Visa Class A  vs.  Ultimus Managers Trust

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Ultimus Managers Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultimus Managers Trust are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ultimus Managers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Ultimus Managers

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

The idea behind Visa Class A and Ultimus Managers Trust 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.