Correlation Between Visa and Associated Capital

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

Diversification Opportunities for Visa and Associated Capital

0.8

Correlation Coefficient

Visa  Associated Capital

Very poor diversification

The 3 months correlation between Visa and Associated is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Associated Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Capital 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 Associated Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Capital has no effect on the direction of Visa i.e., Visa and Associated Capital go up and down completely randomly.

Pair Corralation between Visa and Associated Capital

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.78 times more return on investment than Associated Capital. However, Visa Class A is 1.29 times less risky than Associated Capital. It trades about 0.01 of its potential returns per unit of risk. Associated Capital Group is currently generating about -0.04 per unit of risk. If you would invest  31,251  in Visa Class A on January 5, 2025 and sell it today you would earn a total of  62.00  from holding Visa Class A or generate 0.2% 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.  Associated Capital Group

Visa Class A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Associated Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Associated Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Associated Capital

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

The idea behind Visa Class A and Associated Capital Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.