Correlation Between Visa and Associated British
Can any of the company-specific risk be diversified away by investing in both Visa and Associated British 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 Associated British 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 Associated British Foods, you can compare the effects of market volatilities on Visa and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Associated British.
Diversification Opportunities for Visa and Associated British
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Associated is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Visa i.e., Visa and Associated British go up and down completely randomly.
Pair Corralation between Visa and Associated British
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.97 times more return on investment than Associated British. However, Visa Class A is 1.04 times less risky than Associated British. It trades about 0.34 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.08 per unit of risk. If you would invest 29,129 in Visa Class A on September 4, 2024 and sell it today you would earn a total of 2,536 from holding Visa Class A or generate 8.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. Associated British Foods
Performance |
| Timeline |
| Visa Class A |
| Associated British Foods |
Visa and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Associated British
The main advantage of trading using opposite Visa and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Associated British vs. Cogent Communications Holdings | Associated British vs. Shenandoah Telecommunications | Associated British vs. Charter Communications | Associated British vs. Zoom Video Communications |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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