Correlation Between Visa and Bound
Can any of the company-specific risk be diversified away by investing in both Visa and Bound 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 Bound 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 Bound and Beyond, you can compare the effects of market volatilities on Visa and Bound 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 Bound. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Bound.
Diversification Opportunities for Visa and Bound
Very good diversification
The 3 months correlation between Visa and Bound is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Bound and Beyond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bound and Beyond 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 Bound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bound and Beyond has no effect on the direction of Visa i.e., Visa and Bound go up and down completely randomly.
Pair Corralation between Visa and Bound
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.72 times more return on investment than Bound. However, Visa Class A is 1.39 times less risky than Bound. It trades about 0.33 of its potential returns per unit of risk. Bound and Beyond is currently generating about -0.02 per unit of risk. If you would invest 29,129 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 2,379 from holding Visa Class A or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. Bound and Beyond
Performance |
| Timeline |
| Visa Class A |
| Bound and Beyond |
Visa and Bound Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Bound
The main advantage of trading using opposite Visa and Bound positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Bound 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 Bound will offset losses from the drop in Bound's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| Bound vs. BCPG Public | Bound vs. Aqua Public | Bound vs. Energy Absolute Public | Bound vs. Bangkok Aviation Fuel |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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