Correlation Between Visa and Biotron
Can any of the company-specific risk be diversified away by investing in both Visa and Biotron 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 Biotron 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 Biotron Limited, you can compare the effects of market volatilities on Visa and Biotron 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 Biotron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Biotron.
Diversification Opportunities for Visa and Biotron
Very good diversification
The 3 months correlation between Visa and Biotron is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Biotron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotron Limited 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 Biotron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotron Limited has no effect on the direction of Visa i.e., Visa and Biotron go up and down completely randomly.
Pair Corralation between Visa and Biotron
Taking into account the 90-day investment horizon Visa is expected to generate 1.79 times less return on investment than Biotron. But when comparing it to its historical volatility, Visa Class A is 7.75 times less risky than Biotron. It trades about 0.1 of its potential returns per unit of risk. Biotron Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2.04 in Biotron Limited on September 1, 2024 and sell it today you would lose (0.79) from holding Biotron Limited or give up 38.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Visa Class A vs. Biotron Limited
Performance |
| Timeline |
| Visa Class A |
| Biotron Limited |
Visa and Biotron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Biotron
The main advantage of trading using opposite Visa and Biotron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Biotron 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 Biotron will offset losses from the drop in Biotron's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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