Correlation Between Visa and Innovator Equity

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

Diversification Opportunities for Visa and Innovator Equity

0.83

Correlation Coefficient

Visa  Innovator Equity

Very poor diversification

The 3 months correlation between Visa and Innovator is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Innovator Equity Accelerated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Acc 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Acc has no effect on the direction of Visa i.e., Visa and Innovator Equity go up and down completely randomly.

Pair Corralation between Visa and Innovator Equity

Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.96 times more return on investment than Innovator Equity. However, Visa is 2.96 times more volatile than Innovator Equity Accelerated. It trades about 0.08 of its potential returns per unit of risk. Innovator Equity Accelerated is currently generating about 0.14 per unit of risk. If you would invest  25,801  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  5,782  from holding Visa Class A or generate 22.41% return on investment over 90 days.

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

Visa Class A  vs.  Innovator Equity Accelerated

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Innovator Equity Acc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Accelerated are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking indicators, Innovator Equity is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Visa and Innovator Equity

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

The idea behind Visa Class A and Innovator Equity Accelerated 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.