Correlation Between Central Securities and Visa
Can any of the company-specific risk be diversified away by investing in both Central Securities 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 Central Securities and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Securities and Visa Class A, you can compare the effects of market volatilities on Central Securities 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 Central Securities with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Securities and Visa.
Diversification Opportunities for Central Securities and Visa
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Visa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Central Securities and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Central Securities 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 Central Securities 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 Class A has no effect on the direction of Central Securities i.e., Central Securities and Visa go up and down completely randomly.
Pair Corralation between Central Securities and Visa
Considering the 90-day investment horizon Central Securities is expected to generate 0.61 times more return on investment than Visa. However, Central Securities is 1.63 times less risky than Visa. It trades about 0.19 of its potential returns per unit of risk. Visa Class A is currently generating about 0.09 per unit of risk. If you would invest 3,509 in Central Securities on September 4, 2024 and sell it today you would earn a total of 1,230 from holding Central Securities or generate 35.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Central Securities vs. Visa Class A
Performance |
| Timeline |
| Central Securities |
| Visa Class A |
Central Securities and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Securities and Visa
The main advantage of trading using opposite Central Securities and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Securities 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.| Central Securities vs. Invesco High Income | Central Securities vs. Munivest Fund | Central Securities vs. DWS Municipal Income | Central Securities vs. Blackrock Muniyield Quality |
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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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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