Correlation Between Xerox Corp and Visa

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Can any of the company-specific risk be diversified away by investing in both Xerox Corp and Visa 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 Xerox Corp and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xerox Corp and Visa Inc, you can compare the effects of market volatilities on Xerox Corp and Visa 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 Xerox Corp with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xerox Corp and Visa.

Diversification Opportunities for Xerox Corp and Visa

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Xerox and Visa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xerox Corp and Visa Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and Xerox Corp 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 Xerox Corp are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Xerox Corp i.e., Xerox Corp and Visa go up and down completely randomly.

Pair Corralation between Xerox Corp and Visa

Considering the 90-day investment horizon Xerox Corp is expected to under-perform the Visa. In addition to that, Xerox Corp is 1.36 times more volatile than Visa Inc. It trades about -0.06 of its total potential returns per unit of risk. Visa Inc is currently generating about -0.07 per unit of volatility. If you would invest  21,304  in Visa Inc on February 15, 2022 and sell it today you would lose (1,523)  from holding Visa Inc or give up 7.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Xerox Corp  vs.  Visa Inc

 Performance (%) 
      Timeline 
Xerox Corp 
Xerox Performance
0 of 100
Over the last 90 days Xerox Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Xerox Price Channel

Visa Inc 
Visa Performance
0 of 100
Over the last 90 days Visa Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Visa Price Channel

Xerox Corp and Visa Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Xerox Corp and Visa

The main advantage of trading using opposite Xerox Corp and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xerox Corp position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.
The idea behind Xerox Corp and Visa Inc 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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