Correlation Between Visa and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Visa and Aristocrat Leisure 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 Aristocrat Leisure 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 Aristocrat Leisure Limited, you can compare the effects of market volatilities on Visa and Aristocrat Leisure 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 Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Aristocrat Leisure.
Diversification Opportunities for Visa and Aristocrat Leisure
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Aristocrat is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure 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 Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Visa i.e., Visa and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Visa and Aristocrat Leisure
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.31 times more return on investment than Aristocrat Leisure. However, Visa Class A is 3.18 times less risky than Aristocrat Leisure. It trades about 0.41 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.04 per unit of risk. If you would invest 32,302 in Visa Class A on November 23, 2024 and sell it today you would earn a total of 2,551 from holding Visa Class A or generate 7.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Aristocrat Leisure Limited
Performance |
Timeline |
Visa Class A |
Aristocrat Leisure |
Visa and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Aristocrat Leisure
The main advantage of trading using opposite Visa and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Aristocrat Leisure 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 Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.Visa vs. American Express | ||
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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