Correlation Between International Business and Visa

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

Diversification Opportunities for International Business and Visa

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between International and Visa is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and International Business 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 International Business Machines 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 International Business i.e., International Business and Visa go up and down completely randomly.

Pair Corralation between International Business and Visa

Considering the 90-day investment horizon International Business Machines is expected to generate 0.9 times more return on investment than Visa. However, International Business Machines is 1.12 times less risky than Visa. It trades about -0.34 of its potential returns per unit of risk. Visa Inc is currently generating about -0.41 per unit of risk. If you would invest  12,966  in International Business Machines on July 3, 2022 and sell it today you would lose (1,085)  from holding International Business Machines or give up 8.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  Visa Inc

 Performance (%) 
       Timeline  
International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

International 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 sluggish 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

International Business and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Visa

The main advantage of trading using opposite International Business and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.
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The idea behind International Business Machines 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.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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