Correlation Between Visa and Foreign Trade
Can any of the company-specific risk be diversified away by investing in both Visa and Foreign Trade 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 Foreign Trade 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 Foreign Trade Bank, you can compare the effects of market volatilities on Visa and Foreign Trade 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 Foreign Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Foreign Trade.
Diversification Opportunities for Visa and Foreign Trade
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Foreign is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Foreign Trade Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Trade Bank 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 Foreign Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Trade Bank has no effect on the direction of Visa i.e., Visa and Foreign Trade go up and down completely randomly.
Pair Corralation between Visa and Foreign Trade
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.79 times more return on investment than Foreign Trade. However, Visa Class A is 1.27 times less risky than Foreign Trade. It trades about 0.36 of its potential returns per unit of risk. Foreign Trade Bank is currently generating about 0.12 per unit of risk. If you would invest 28,365 in Visa Class A on August 28, 2024 and sell it today you would earn a total of 2,954 from holding Visa Class A or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Foreign Trade Bank
Performance |
| Timeline |
| Visa Class A |
| Foreign Trade Bank |
Visa and Foreign Trade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Foreign Trade
The main advantage of trading using opposite Visa and Foreign Trade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Foreign Trade 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 Foreign Trade will offset losses from the drop in Foreign Trade's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Foreign Trade vs. Banco Santander Chile | Foreign Trade vs. Bancolombia SA ADR | Foreign Trade vs. Banco Bradesco SA | Foreign Trade vs. Credicorp |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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