Correlation Between Visa and Global X

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

Diversification Opportunities for Visa and Global X

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Visa and Global is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Global X SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SP 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X SP has no effect on the direction of Visa i.e., Visa and Global X go up and down completely randomly.

Pair Corralation between Visa and Global X

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.48 times more return on investment than Global X. However, Visa is 1.48 times more volatile than Global X SP. It trades about 0.09 of its potential returns per unit of risk. Global X SP is currently generating about 0.1 per unit of risk. If you would invest  26,992  in Visa Class A on August 25, 2024 and sell it today you would earn a total of  4,000  from holding Visa Class A or generate 14.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Visa Class A  vs.  Global X SP

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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.
Global X SP 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Global X SP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Visa and Global X Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Global X

The main advantage of trading using opposite Visa and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.
The idea behind Visa Class A and Global X SP 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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