Correlation Between Visa and ALTRIA

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

Diversification Opportunities for Visa and ALTRIA

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Visa and ALTRIA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ALTRIA GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALTRIA GROUP INC 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 ALTRIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALTRIA GROUP INC has no effect on the direction of Visa i.e., Visa and ALTRIA go up and down completely randomly.

Pair Corralation between Visa and ALTRIA

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.49 times more return on investment than ALTRIA. However, Visa is 1.49 times more volatile than ALTRIA GROUP INC. It trades about 0.09 of its potential returns per unit of risk. ALTRIA GROUP INC is currently generating about 0.01 per unit of risk. If you would invest  20,975  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  10,533  from holding Visa Class A or generate 50.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Visa Class A  vs.  ALTRIA GROUP INC

 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.
ALTRIA GROUP INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ALTRIA GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALTRIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Visa and ALTRIA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and ALTRIA

The main advantage of trading using opposite Visa and ALTRIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ALTRIA 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 ALTRIA will offset losses from the drop in ALTRIA's long position.
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The idea behind Visa Class A and ALTRIA GROUP INC 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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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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