Correlation Between Western Asset and Visa
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Investment and Visa Class A, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Visa.
Diversification Opportunities for Western Asset and Visa
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Visa is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment 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 Western Asset 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 Western Asset Investment 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 Western Asset i.e., Western Asset and Visa go up and down completely randomly.
Pair Corralation between Western Asset and Visa
Considering the 90-day investment horizon Western Asset is expected to generate 8.15 times less return on investment than Visa. But when comparing it to its historical volatility, Western Asset Investment is 2.5 times less risky than Visa. It trades about 0.03 of its potential returns per unit of risk. Visa Class A is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 27,110 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 4,398 from holding Visa Class A or generate 16.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Investment vs. Visa Class A
Performance |
| Timeline |
| Western Asset Investment |
| Visa Class A |
Western Asset and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Visa
The main advantage of trading using opposite Western Asset and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Pioneer Floating Rate | Western Asset vs. The Gabelli Equity | Western Asset vs. Pioneer Municipal High | Western Asset vs. Nuveen Global High |
| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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