Correlation Between Visa and Huntington Ingalls

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

Diversification Opportunities for Visa and Huntington Ingalls

0.6

Correlation Coefficient

Visa  Huntington Ingalls

Poor diversification

The 3 months correlation between Visa and Huntington is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls 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 Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Visa i.e., Visa and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Visa and Huntington Ingalls

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.31 times more return on investment than Huntington Ingalls. However, Visa Class A is 3.26 times less risky than Huntington Ingalls. It trades about 0.11 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.15 per unit of risk. If you would invest  27,568  in Visa Class A on February 11, 2024 and sell it today you would earn a total of  506.00  from holding Visa Class A or generate 1.84% return on investment over 90 days.

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

Visa Class A  vs.  Huntington Ingalls Industries

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.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Visa and Huntington Ingalls

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

The idea behind Visa Class A and Huntington Ingalls Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.