Correlation Between Visa and Village Bank

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

Diversification Opportunities for Visa and Village Bank

0.51

Correlation Coefficient

Visa  Village Bank

Very weak diversification

The 3 months correlation between Visa and Village is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank 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 Village Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Bank has no effect on the direction of Visa i.e., Visa and Village Bank go up and down completely randomly.

Pair Corralation between Visa and Village Bank

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.39 times more return on investment than Village Bank. However, Visa Class A is 2.58 times less risky than Village Bank. It trades about 0.11 of its potential returns per unit of risk. Village Bank and is currently generating about 0.01 per unit of risk. If you would invest  22,663  in Visa Class A on January 24, 2024 and sell it today you would earn a total of  4,570  from holding Visa Class A or generate 20.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.69%
Values	Daily Returns

Visa Class A  vs.  Village Bank and

Visa Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Village Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Bank and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Village Bank is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Village Bank

The main advantage of trading using opposite Visa and Village Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Village Bank 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 Village Bank will offset losses from the drop in Village Bank's long position.

The idea behind Visa Class A and Village Bank and 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.