Correlation Between Visa and AES
Can any of the company-specific risk be diversified away by investing in both Visa and AES 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 AES 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 The AES, you can compare the effects of market volatilities on Visa and AES 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 AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and AES.
Diversification Opportunities for Visa and AES
Pay attention - limited upside
The 3 months correlation between Visa and AES is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES 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 AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Visa i.e., Visa and AES go up and down completely randomly.
Pair Corralation between Visa and AES
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.47 times more return on investment than AES. However, Visa Class A is 2.11 times less risky than AES. It trades about 0.36 of its potential returns per unit of risk. The AES is currently generating about -0.37 per unit of risk. If you would invest 28,365 in Visa Class A on August 28, 2024 and sell it today you would earn a total of 2,954 from holding Visa Class A or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. The AES
Performance |
| Timeline |
| Visa Class A |
| AES |
Visa and AES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and AES
The main advantage of trading using opposite Visa and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, AES 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 AES will offset losses from the drop in AES's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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