Correlation Between Visa and Business First
Can any of the company-specific risk be diversified away by investing in both Visa and Business First 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 Business First 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 Business First Bancshares, you can compare the effects of market volatilities on Visa and Business First 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 Business First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Business First.
Diversification Opportunities for Visa and Business First
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Visa and Business is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares 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 Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of Visa i.e., Visa and Business First go up and down completely randomly.
Pair Corralation between Visa and Business First
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.34 times more return on investment than Business First. However, Visa Class A is 2.98 times less risky than Business First. It trades about 0.33 of its potential returns per unit of risk. Business First Bancshares is currently generating about 0.1 per unit of risk. If you would invest 28,960 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 2,510 from holding Visa Class A or generate 8.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Business First Bancshares
Performance |
| Timeline |
| Visa Class A |
| Business First Bancshares |
Visa and Business First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Business First
The main advantage of trading using opposite Visa and Business First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Business First 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 Business First will offset losses from the drop in Business First's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Business First vs. First Community | Business First vs. Community West Bancshares | Business First vs. First Financial Northwest | Business First vs. First Northwest Bancorp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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