Correlation Between Visa and US Global

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

Diversification Opportunities for Visa and US Global

-0.51

Correlation Coefficient

Visa  US Global

Excellent diversification

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

Pair Corralation between Visa and US Global

Taking into account the 90-day investment horizon Visa is expected to generate 16.15 times less return on investment than US Global. But when comparing it to its historical volatility, Visa Class A is 2.3 times less risky than US Global. It trades about 0.04 of its potential returns per unit of risk. US Global GO is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,492  in US Global GO on February 20, 2024 and sell it today you would earn a total of  605.00  from holding US Global GO or generate 40.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  US Global GO

Visa Class A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

US Global GO

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Global GO are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, US Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and US Global

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

The idea behind Visa Class A and US Global GO 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.