Correlation Between Visa and BRIT AMER
Can any of the company-specific risk be diversified away by investing in both Visa and BRIT AMER 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 BRIT AMER 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 BRIT AMER TOBACCO, you can compare the effects of market volatilities on Visa and BRIT AMER 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 BRIT AMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BRIT AMER.
Diversification Opportunities for Visa and BRIT AMER
Almost no diversification
The 3 months correlation between Visa and BRIT is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of Visa i.e., Visa and BRIT AMER go up and down completely randomly.
Pair Corralation between Visa and BRIT AMER
Taking into account the 90-day investment horizon Visa is expected to generate 1.54 times less return on investment than BRIT AMER. But when comparing it to its historical volatility, Visa Class A is 1.07 times less risky than BRIT AMER. It trades about 0.1 of its potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,565 in BRIT AMER TOBACCO on November 9, 2024 and sell it today you would earn a total of 1,422 from holding BRIT AMER TOBACCO or generate 55.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.52% |
| Values | Daily Returns |
Visa Class A vs. BRIT AMER TOBACCO
Performance |
| Timeline |
| Visa Class A |
| BRIT AMER TOBACCO |
Visa and BRIT AMER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BRIT AMER
The main advantage of trading using opposite Visa and BRIT AMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, BRIT AMER 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 BRIT AMER will offset losses from the drop in BRIT AMER's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| BRIT AMER vs. GEELY AUTOMOBILE | BRIT AMER vs. MCEWEN MINING INC | BRIT AMER vs. MAGNUM MINING EXP | BRIT AMER vs. Evolution Mining Limited |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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