Correlation Between Visa and NICE Information

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

Diversification Opportunities for Visa and NICE Information

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Visa and NICE is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and NICE Information Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE Information Service 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 NICE Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE Information Service has no effect on the direction of Visa i.e., Visa and NICE Information go up and down completely randomly.

Pair Corralation between Visa and NICE Information

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.63 times more return on investment than NICE Information. However, Visa Class A is 1.58 times less risky than NICE Information. It trades about 0.11 of its potential returns per unit of risk. NICE Information Service is currently generating about 0.05 per unit of risk. If you would invest  26,932  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  4,576  from holding Visa Class A or generate 16.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy96.06%
ValuesDaily Returns

Visa Class A  vs.  NICE Information Service

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.
NICE Information Service 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NICE Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Visa and NICE Information Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and NICE Information

The main advantage of trading using opposite Visa and NICE Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, NICE Information 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 NICE Information will offset losses from the drop in NICE Information's long position.
The idea behind Visa Class A and NICE Information Service 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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