Correlation Between Visa and Chubb

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

Diversification Opportunities for Visa and Chubb

0.94

Correlation Coefficient

Visa  Chubb

Almost no diversification

The 11 months correlation between Visa and Chubb is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb 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 Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Visa i.e., Visa and Chubb go up and down completely randomly.

Pair Corralation between Visa and Chubb

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Chubb. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.59 times less risky than Chubb. The stock trades about -0.11 of its potential returns per unit of risk. The Chubb is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  25,316  in Chubb on February 7, 2024 and sell it today you would lose (462.00) from holding Chubb or give up 1.82% of portfolio value over 90 days.

Time Period	11 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Chubb

Visa Class A

Risk-Adjusted Performance

7 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 7 (%) 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.

Chubb

Risk-Adjusted Performance

9 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Chubb may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Visa and Chubb

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

The idea behind Visa Class A and Chubb 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.