Correlation Between Visa and COMMONSPIRIT

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

Diversification Opportunities for Visa and COMMONSPIRIT

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Visa and COMMONSPIRIT is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and COMMONSPIRIT HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMONSPIRIT HEALTH 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 COMMONSPIRIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMONSPIRIT HEALTH has no effect on the direction of Visa i.e., Visa and COMMONSPIRIT go up and down completely randomly.

Pair Corralation between Visa and COMMONSPIRIT

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.8 times more return on investment than COMMONSPIRIT. However, Visa Class A is 1.25 times less risky than COMMONSPIRIT. It trades about 0.16 of its potential returns per unit of risk. COMMONSPIRIT HEALTH is currently generating about -0.06 per unit of risk. If you would invest  27,801  in Visa Class A on September 2, 2024 and sell it today you would earn a total of  3,707  from holding Visa Class A or generate 13.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy90.63%
ValuesDaily Returns

Visa Class A  vs.  COMMONSPIRIT HEALTH

 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.
COMMONSPIRIT HEALTH 

Risk-Adjusted Performance

0 of 100

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

Visa and COMMONSPIRIT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and COMMONSPIRIT

The main advantage of trading using opposite Visa and COMMONSPIRIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, COMMONSPIRIT 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 COMMONSPIRIT will offset losses from the drop in COMMONSPIRIT's long position.
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The idea behind Visa Class A and COMMONSPIRIT HEALTH 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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