Correlation Between Visa and Smith AO
Can any of the company-specific risk be diversified away by investing in both Visa and Smith AO 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 Smith AO 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 Smith AO, you can compare the effects of market volatilities on Visa and Smith AO 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 Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Smith AO.
Diversification Opportunities for Visa and Smith AO
Pay attention - limited upside
The 3 months correlation between Visa and Smith is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO 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 Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Visa i.e., Visa and Smith AO go up and down completely randomly.
Pair Corralation between Visa and Smith AO
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.83 times more return on investment than Smith AO. However, Visa Class A is 1.2 times less risky than Smith AO. It trades about 0.16 of its potential returns per unit of risk. Smith AO is currently generating about -0.08 per unit of risk. If you would invest 27,801 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 3,669 from holding Visa Class A or generate 13.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Smith AO
Performance |
| Timeline |
| Visa Class A |
| Smith AO |
Visa and Smith AO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Smith AO
The main advantage of trading using opposite Visa and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Smith AO 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 Smith AO will offset losses from the drop in Smith AO's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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