Correlation Between Visa and AbbVie
Can any of the company-specific risk be diversified away by investing in both Visa and AbbVie 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 AbbVie 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 AbbVie Inc, you can compare the effects of market volatilities on Visa and AbbVie 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 AbbVie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and AbbVie.
Diversification Opportunities for Visa and AbbVie
Excellent diversification
The 3 months correlation between Visa and AbbVie is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc 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 AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Visa i.e., Visa and AbbVie go up and down completely randomly.
Pair Corralation between Visa and AbbVie
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.41 times more return on investment than AbbVie. However, Visa Class A is 2.43 times less risky than AbbVie. It trades about 0.29 of its potential returns per unit of risk. AbbVie Inc is currently generating about -0.11 per unit of risk. If you would invest 28,322 in Visa Class A on August 24, 2024 and sell it today you would earn a total of 2,417 from holding Visa Class A or generate 8.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Visa Class A vs. AbbVie Inc
Performance |
| Timeline |
| Visa Class A |
| AbbVie Inc |
Visa and AbbVie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and AbbVie
The main advantage of trading using opposite Visa and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, AbbVie 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 AbbVie will offset losses from the drop in AbbVie's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| AbbVie vs. Merck Company | AbbVie vs. Pfizer Inc | AbbVie vs. Eli Lilly and | AbbVie vs. Bristol Myers Squibb |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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