Correlation Between Visa and AllianceBernstein

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

Diversification Opportunities for Visa and AllianceBernstein

0.6

Correlation Coefficient

Visa  AllianceBernstein

Poor diversification

The 3 months correlation between Visa and AllianceBernstein is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AllianceBernstein Holding LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllianceBernstein 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 AllianceBernstein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllianceBernstein has no effect on the direction of Visa i.e., Visa and AllianceBernstein go up and down completely randomly.

Pair Corralation between Visa and AllianceBernstein

Taking into account the 90-day investment horizon Visa is expected to generate 1.25 times less return on investment than AllianceBernstein. In addition to that, Visa is 1.11 times more volatile than AllianceBernstein Holding LP. It trades about 0.18 of its total potential returns per unit of risk. AllianceBernstein Holding LP is currently generating about 0.24 per unit of volatility. If you would invest  3,187  in AllianceBernstein Holding LP on August 4, 2024 and sell it today you would earn a total of  556.00  from holding AllianceBernstein Holding LP or generate 17.45% 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.  AllianceBernstein Holding LP

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.

AllianceBernstein

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AllianceBernstein Holding LP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, AllianceBernstein sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and AllianceBernstein

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

The idea behind Visa Class A and AllianceBernstein Holding LP 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.