Correlation Between Visa and CREDIT

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

Diversification Opportunities for Visa and CREDIT

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Visa and CREDIT is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CREDIT SUISSE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREDIT SUISSE AG 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 CREDIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREDIT SUISSE AG has no effect on the direction of Visa i.e., Visa and CREDIT go up and down completely randomly.

Pair Corralation between Visa and CREDIT

Taking into account the 90-day investment horizon Visa is expected to generate 31.71 times less return on investment than CREDIT. But when comparing it to its historical volatility, Visa Class A is 58.48 times less risky than CREDIT. It trades about 0.1 of its potential returns per unit of risk. CREDIT SUISSE AG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,596  in CREDIT SUISSE AG on September 2, 2024 and sell it today you would earn a total of  854.00  from holding CREDIT SUISSE AG or generate 9.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy79.3%
ValuesDaily Returns

Visa Class A  vs.  CREDIT SUISSE AG

 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.
CREDIT SUISSE AG 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CREDIT SUISSE AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CREDIT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Visa and CREDIT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and CREDIT

The main advantage of trading using opposite Visa and CREDIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, CREDIT 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 CREDIT will offset losses from the drop in CREDIT's long position.
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The idea behind Visa Class A and CREDIT SUISSE AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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