Correlation Between Visa and Bath Body
Can any of the company-specific risk be diversified away by investing in both Visa and Bath Body 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 Bath Body 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 Bath Body Works, you can compare the effects of market volatilities on Visa and Bath Body 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 Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Bath Body.
Diversification Opportunities for Visa and Bath Body
Poor diversification
The 3 months correlation between Visa and Bath is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works 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 Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Visa i.e., Visa and Bath Body go up and down completely randomly.
Pair Corralation between Visa and Bath Body
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.37 times more return on investment than Bath Body. However, Visa Class A is 2.72 times less risky than Bath Body. It trades about 0.09 of its potential returns per unit of risk. Bath Body Works is currently generating about 0.01 per unit of risk. If you would invest 20,419 in Visa Class A on September 24, 2024 and sell it today you would earn a total of 11,352 from holding Visa Class A or generate 55.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.99% |
| Values | Daily Returns |
Visa Class A vs. Bath Body Works
Performance |
| Timeline |
| Visa Class A |
| Bath Body Works |
Visa and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Bath Body
The main advantage of trading using opposite Visa and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.| Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
| Bath Body vs. Uniper SE | Bath Body vs. Mulberry Group PLC | Bath Body vs. London Security Plc | Bath Body vs. Triad Group PLC |
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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