Correlation Between Visa and Western Acquisition

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

Diversification Opportunities for Visa and Western Acquisition

0.0

Correlation Coefficient

Visa  Western Acquisition

Pay attention - limited upside

The 3 months correlation between Visa and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Visa i.e., Visa and Western Acquisition go up and down completely randomly.

Pair Corralation between Visa and Western Acquisition

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Western Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.52 times less risky than Western Acquisition. The stock trades about -0.01 of its potential returns per unit of risk. The Western Acquisition Ventures is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,047  in Western Acquisition Ventures on July 23, 2024 and sell it today you would earn a total of  132.00  from holding Western Acquisition Ventures or generate 12.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Western Acquisition Ventures

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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 November 2024.

Western Acquisition

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Visa and Western Acquisition

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

The idea behind Visa Class A and Western Acquisition Ventures 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.