Correlation Between Visa and Balfour Beatty
Can any of the company-specific risk be diversified away by investing in both Visa and Balfour Beatty 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 Balfour Beatty 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 Balfour Beatty PLC, you can compare the effects of market volatilities on Visa and Balfour Beatty 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 Balfour Beatty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Balfour Beatty.
Diversification Opportunities for Visa and Balfour Beatty
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Balfour is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Balfour Beatty PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty PLC 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 Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty PLC has no effect on the direction of Visa i.e., Visa and Balfour Beatty go up and down completely randomly.
Pair Corralation between Visa and Balfour Beatty
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.4 times more return on investment than Balfour Beatty. However, Visa Class A is 2.48 times less risky than Balfour Beatty. It trades about 0.1 of its potential returns per unit of risk. Balfour Beatty PLC is currently generating about 0.03 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 Together |
| Strength | Significant |
| Accuracy | 35.71% |
| Values | Daily Returns |
Visa Class A vs. Balfour Beatty PLC
Performance |
| Timeline |
| Visa Class A |
| Balfour Beatty PLC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Visa and Balfour Beatty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Balfour Beatty
The main advantage of trading using opposite Visa and Balfour Beatty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Balfour Beatty 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 Balfour Beatty will offset losses from the drop in Balfour Beatty'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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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