Correlation Between Visa and St James’s
Can any of the company-specific risk be diversified away by investing in both Visa and St James’s 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 St James’s 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 St Jamess Place, you can compare the effects of market volatilities on Visa and St James’s 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 St James’s. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and St James’s.
Diversification Opportunities for Visa and St James’s
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and 1IV is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and St Jamess Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Jamess Place 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 St James’s. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Jamess Place has no effect on the direction of Visa i.e., Visa and St James’s go up and down completely randomly.
Pair Corralation between Visa and St James’s
Taking into account the 90-day investment horizon Visa is expected to generate 1.79 times less return on investment than St James’s. But when comparing it to its historical volatility, Visa Class A is 2.77 times less risky than St James’s. It trades about 0.09 of its potential returns per unit of risk. St Jamess Place is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 759.00 in St Jamess Place on September 14, 2024 and sell it today you would earn a total of 314.00 from holding St Jamess Place or generate 41.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.18% |
| Values | Daily Returns |
Visa Class A vs. St Jamess Place
Performance |
| Timeline |
| Visa Class A |
| St Jamess Place |
Visa and St James’s Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and St James’s
The main advantage of trading using opposite Visa and St James’s positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, St James’s 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 St James’s will offset losses from the drop in St James’s' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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