Correlation Between Visa and Select Sector
Can any of the company-specific risk be diversified away by investing in both Visa and Select Sector 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 Select Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Inc and The Select Sector, you can compare the effects of market volatilities on Visa and Select Sector 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 Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Select Sector.
Diversification Opportunities for Visa and Select Sector
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Select is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector 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 Inc are associated (or correlated) with Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector has no effect on the direction of Visa i.e., Visa and Select Sector go up and down completely randomly.
Pair Corralation between Visa and Select Sector
Given the investment horizon of 90 days Visa Inc is expected to generate 0.82 times more return on investment than Select Sector. However, Visa Inc is 1.22 times less risky than Select Sector. It trades about 0.43 of its potential returns per unit of risk. The Select Sector is currently generating about 0.14 per unit of risk. If you would invest 558,908 in Visa Inc on August 25, 2024 and sell it today you would earn a total of 77,592 from holding Visa Inc or generate 13.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Inc vs. The Select Sector
Performance |
| Timeline |
| Visa Inc |
| Select Sector |
Visa and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Select Sector
The main advantage of trading using opposite Visa and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector's long position.| Visa vs. Southwest Airlines | Visa vs. The Bank of | Visa vs. Grupo Carso SAB | Visa vs. Monster Beverage Corp |
| Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard STAR Funds | Select Sector vs. SPDR SP 500 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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