Correlation Between Visa and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Visa and ARMOUR Residential 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 ARMOUR Residential 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 ARMOUR Residential REIT, you can compare the effects of market volatilities on Visa and ARMOUR Residential 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 ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and ARMOUR Residential.
Diversification Opportunities for Visa and ARMOUR Residential
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and ARMOUR is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT 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 ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Visa i.e., Visa and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Visa and ARMOUR Residential
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.03 times more return on investment than ARMOUR Residential. However, Visa is 1.03 times more volatile than ARMOUR Residential REIT. It trades about 0.1 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.04 per unit of risk. If you would invest 27,135 in Visa Class A on September 2, 2024 and sell it today you would earn a total of 4,373 from holding Visa Class A or generate 16.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Visa Class A |
| ARMOUR Residential REIT |
Visa and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and ARMOUR Residential
The main advantage of trading using opposite Visa and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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