Correlation Between Visa and Smallcap World

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

Diversification Opportunities for Visa and Smallcap World

-0.48

Correlation Coefficient

Visa  Smallcap World

Very good diversification

The 3 months correlation between Visa and Smallcap is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World 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 Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Visa i.e., Visa and Smallcap World go up and down completely randomly.

Pair Corralation between Visa and Smallcap World

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Smallcap World. In addition to that, Visa is 1.82 times more volatile than Smallcap World Fund. It trades about -0.06 of its total potential returns per unit of risk. Smallcap World Fund is currently generating about 0.19 per unit of volatility. If you would invest  6,744  in Smallcap World Fund on May 16, 2025 and sell it today you would earn a total of  608.00  from holding Smallcap World Fund or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  Smallcap World Fund

Visa Class A

Risk-Adjusted Performance

Weakest

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.

Smallcap World

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Smallcap World may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Visa and Smallcap World

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

The idea behind Visa Class A and Smallcap World Fund 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..