Correlation Between Visa and Amazon
Can any of the company-specific risk be diversified away by investing in both Visa and Amazon 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 Amazon 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 Amazon Inc, you can compare the effects of market volatilities on Visa and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Amazon.
Diversification Opportunities for Visa and Amazon
Weak diversification
The 3 months correlation between Visa and Amazon is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Visa i.e., Visa and Amazon go up and down completely randomly.
Pair Corralation between Visa and Amazon
Taking into account the 90-day investment horizon Visa is expected to generate 7.58 times less return on investment than Amazon. But when comparing it to its historical volatility, Visa Class A is 4.92 times less risky than Amazon. It trades about 0.08 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 21,253 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 645.00 from holding Amazon Inc or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 36.36% |
| Values | Daily Returns |
Visa Class A vs. Amazon Inc
Performance |
| Timeline |
| Visa Class A |
| Amazon Inc |
Visa and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Amazon
The main advantage of trading using opposite Visa and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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