Correlation Between Visa and Amer Beacon
Can any of the company-specific risk be diversified away by investing in both Visa and Amer Beacon 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 Amer Beacon 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 Amer Beacon Ark, you can compare the effects of market volatilities on Visa and Amer Beacon 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 Amer Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Amer Beacon.
Diversification Opportunities for Visa and Amer Beacon
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Amer is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Amer Beacon Ark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Beacon Ark 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 Amer Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Beacon Ark has no effect on the direction of Visa i.e., Visa and Amer Beacon go up and down completely randomly.
Pair Corralation between Visa and Amer Beacon
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.35 times more return on investment than Amer Beacon. However, Visa Class A is 2.84 times less risky than Amer Beacon. It trades about 0.35 of its potential returns per unit of risk. Amer Beacon Ark is currently generating about -0.02 per unit of risk. If you would invest 31,478 in Visa Class A on November 28, 2024 and sell it today you would earn a total of 3,731 from holding Visa Class A or generate 11.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Amer Beacon Ark
Performance |
| Timeline |
| Visa Class A |
| Amer Beacon Ark |
Visa and Amer Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Amer Beacon
The main advantage of trading using opposite Visa and Amer Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Amer Beacon 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 Amer Beacon will offset losses from the drop in Amer Beacon'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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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