Correlation Between Visa and Digital Power
Can any of the company-specific risk be diversified away by investing in both Visa and Digital Power 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 Digital Power 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 Digital Power Communications, you can compare the effects of market volatilities on Visa and Digital Power 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 Digital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Digital Power.
Diversification Opportunities for Visa and Digital Power
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Digital is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Digital Power Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Power Commun 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 Digital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Power Commun has no effect on the direction of Visa i.e., Visa and Digital Power go up and down completely randomly.
Pair Corralation between Visa and Digital Power
Taking into account the 90-day investment horizon Visa is expected to generate 1.06 times less return on investment than Digital Power. But when comparing it to its historical volatility, Visa Class A is 2.22 times less risky than Digital Power. It trades about 0.09 of its potential returns per unit of risk. Digital Power Communications is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 669,592 in Digital Power Communications on August 29, 2024 and sell it today you would earn a total of 130,408 from holding Digital Power Communications or generate 19.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.39% |
| Values | Daily Returns |
Visa Class A vs. Digital Power Communications
Performance |
| Timeline |
| Visa Class A |
| Digital Power Commun |
Visa and Digital Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Digital Power
The main advantage of trading using opposite Visa and Digital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Digital Power 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 Digital Power will offset losses from the drop in Digital Power's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Digital Power vs. FNC Entertainment Co | Digital Power vs. Echomarketing CoLtd | Digital Power vs. GS Retail Co | Digital Power vs. Nasmedia Co |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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