Correlation Between Visa and Advantage Solutions
Can any of the company-specific risk be diversified away by investing in both Visa and Advantage Solutions 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 Advantage Solutions 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 Advantage Solutions, you can compare the effects of market volatilities on Visa and Advantage Solutions 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 Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Advantage Solutions.
Diversification Opportunities for Visa and Advantage Solutions
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Advantage is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions 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 Advantage Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Solutions has no effect on the direction of Visa i.e., Visa and Advantage Solutions go up and down completely randomly.
Pair Corralation between Visa and Advantage Solutions
Taking into account the 90-day investment horizon Visa is expected to generate 1.95 times less return on investment than Advantage Solutions. But when comparing it to its historical volatility, Visa Class A is 3.73 times less risky than Advantage Solutions. It trades about 0.09 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 214.00 in Advantage Solutions on August 28, 2024 and sell it today you would earn a total of 146.00 from holding Advantage Solutions or generate 68.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Advantage Solutions
Performance |
| Timeline |
| Visa Class A |
| Advantage Solutions |
Visa and Advantage Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Advantage Solutions
The main advantage of trading using opposite Visa and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Advantage Solutions 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 Advantage Solutions will offset losses from the drop in Advantage Solutions' long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Advantage Solutions vs. ADTRAN Inc | Advantage Solutions vs. Belden Inc | Advantage Solutions vs. ADC Therapeutics SA | Advantage Solutions vs. Comtech Telecommunications Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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