Correlation Between General Electric and Visa

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

Diversification Opportunities for General Electric and Visa

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between General and Visa is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and General Electric 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 General Electric 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 General Electric i.e., General Electric and Visa go up and down completely randomly.

Pair Corralation between General Electric and Visa

Allowing for the 90-day total investment horizon General Electric is expected to generate 1.32 times more return on investment than Visa. However, General Electric is 1.32 times more volatile than Visa Inc. It trades about 0.05 of its potential returns per unit of risk. Visa Inc is currently generating about 0.01 per unit of risk. If you would invest  5,009  in General Electric on May 13, 2022 and sell it today you would earn a total of  2,705  from holding General Electric or generate 54.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  Visa Inc

 Performance (%) 
       Timeline  
General Electric 
General Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, General Electric is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

Visa Inc 
Visa Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Visa Price Channel

General Electric and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Visa

The main advantage of trading using opposite General Electric and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric 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.

General Electric

Pair trading matchups for General Electric

The idea behind General Electric 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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