Correlation Between Visa and SOUTHERN

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

Diversification Opportunities for Visa and SOUTHERN

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Visa and SOUTHERN is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SOUTHERN CALIF EDISON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN CALIF EDISON 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN CALIF EDISON has no effect on the direction of Visa i.e., Visa and SOUTHERN go up and down completely randomly.

Pair Corralation between Visa and SOUTHERN

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.94 times more return on investment than SOUTHERN. However, Visa Class A is 1.07 times less risky than SOUTHERN. It trades about 0.28 of its potential returns per unit of risk. SOUTHERN CALIF EDISON is currently generating about -0.18 per unit of risk. If you would invest  29,129  in Visa Class A on September 5, 2024 and sell it today you would earn a total of  2,172  from holding Visa Class A or generate 7.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy90.91%
ValuesDaily Returns

Visa Class A  vs.  SOUTHERN CALIF EDISON

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.
SOUTHERN CALIF EDISON 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SOUTHERN CALIF EDISON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SOUTHERN CALIF EDISON investors.

Visa and SOUTHERN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and SOUTHERN

The main advantage of trading using opposite Visa and SOUTHERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, SOUTHERN 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 SOUTHERN will offset losses from the drop in SOUTHERN's long position.
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The idea behind Visa Class A and SOUTHERN CALIF EDISON 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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