Correlation Between Visa and Columbia
Can any of the company-specific risk be diversified away by investing in both Visa and Columbia 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 Columbia 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 Columbia Government Mortgage, you can compare the effects of market volatilities on Visa and Columbia 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 Columbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Columbia.
Diversification Opportunities for Visa and Columbia
Excellent diversification
The 3 months correlation between Visa and Columbia is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Columbia Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Government 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 Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Government has no effect on the direction of Visa i.e., Visa and Columbia go up and down completely randomly.
Pair Corralation between Visa and Columbia
Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.55 times more return on investment than Columbia. However, Visa is 2.55 times more volatile than Columbia Government Mortgage. It trades about 0.35 of its potential returns per unit of risk. Columbia Government Mortgage is currently generating about 0.11 per unit of risk. If you would invest 28,929 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 2,579 from holding Visa Class A or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. Columbia Government Mortgage
Performance |
| Timeline |
| Visa Class A |
| Columbia Government |
Visa and Columbia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Columbia
The main advantage of trading using opposite Visa and Columbia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Columbia 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 Columbia will offset losses from the drop in Columbia's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Columbia vs. Columbia Ultra Short | Columbia vs. Columbia Integrated Large | Columbia vs. Columbia Integrated Large | Columbia vs. Columbia Integrated Large |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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