Correlation Between Visa and Superior Plus

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Can any of the company-specific risk be diversified away by investing in both Visa and Superior Plus 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 Superior Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Inc and Superior Plus Corp, you can compare the effects of market volatilities on Visa and Superior Plus 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 Superior Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Superior Plus.

Diversification Opportunities for Visa and Superior Plus

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Visa and Superior is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp 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 Inc are associated (or correlated) with Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Visa i.e., Visa and Superior Plus go up and down completely randomly.

Pair Corralation between Visa and Superior Plus

Assuming the 90 days trading horizon Visa Inc is expected to generate 0.34 times more return on investment than Superior Plus. However, Visa Inc is 2.91 times less risky than Superior Plus. It trades about 0.04 of its potential returns per unit of risk. Superior Plus Corp is currently generating about -0.06 per unit of risk. If you would invest  29,965  in Visa Inc on October 12, 2024 and sell it today you would earn a total of  135.00  from holding Visa Inc or generate 0.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy94.44%
ValuesDaily Returns

Visa Inc  vs.  Superior Plus Corp

 Performance 
       Timeline  
Visa Inc 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Visa exhibited solid returns over the last few months and may actually be approaching a breakup point.
Superior Plus Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Visa and Superior Plus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Superior Plus

The main advantage of trading using opposite Visa and Superior Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Superior Plus 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 Superior Plus will offset losses from the drop in Superior Plus' long position.
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The idea behind Visa Inc and Superior Plus Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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