Correlation Between IShares Trust and Visa
Can any of the company-specific risk be diversified away by investing in both IShares Trust 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 IShares Trust and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Visa Inc, you can compare the effects of market volatilities on IShares Trust 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 IShares Trust with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Visa.
Diversification Opportunities for IShares Trust and Visa
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Visa is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and IShares Trust 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 iShares Trust 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 IShares Trust i.e., IShares Trust and Visa go up and down completely randomly.
Pair Corralation between IShares Trust and Visa
Assuming the 90 days trading horizon IShares Trust is expected to generate 5.74 times less return on investment than Visa. But when comparing it to its historical volatility, iShares Trust is 1.5 times less risky than Visa. It trades about 0.08 of its potential returns per unit of risk. Visa Inc is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 543,495 in Visa Inc on August 28, 2024 and sell it today you would earn a total of 106,505 from holding Visa Inc or generate 19.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
iShares Trust vs. Visa Inc
Performance |
| Timeline |
| iShares Trust |
| Visa Inc |
IShares Trust and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Visa
The main advantage of trading using opposite IShares Trust and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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.| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust |
| Visa vs. Verizon Communications | Visa vs. Capital One Financial | Visa vs. Prudential Financial | Visa vs. First Republic Bank |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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