Correlation Between Visa and Victory Bancorp

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

Diversification Opportunities for Visa and Victory Bancorp

0.18

Correlation Coefficient

Visa  Victory Bancorp

Average diversification

The 3 months correlation between Visa and Victory is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and The Victory Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Bancorp 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 Victory Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Bancorp has no effect on the direction of Visa i.e., Visa and Victory Bancorp go up and down completely randomly.

Pair Corralation between Visa and Victory Bancorp

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.66 times more return on investment than Victory Bancorp. However, Visa Class A is 1.52 times less risky than Victory Bancorp. It trades about -0.12 of its potential returns per unit of risk. The Victory Bancorp is currently generating about -0.2 per unit of risk. If you would invest  28,360  in Visa Class A on January 24, 2024 and sell it today you would lose (1,127) from holding Visa Class A or give up 3.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  The Victory Bancorp

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.

Victory Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Visa and Victory Bancorp

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

The idea behind Visa Class A and The Victory Bancorp 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.