Correlation Between Visa and BOX
Can any of the company-specific risk be diversified away by investing in both Visa and BOX 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 BOX 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 BOX, you can compare the effects of market volatilities on Visa and BOX 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 BOX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BOX.
Diversification Opportunities for Visa and BOX
Very good diversification
The 3 months correlation between Visa and BOX is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BOX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOX 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 BOX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOX has no effect on the direction of Visa i.e., Visa and BOX go up and down completely randomly.
Pair Corralation between Visa and BOX
Taking into account the 90-day investment horizon Visa is expected to generate 16.07 times less return on investment than BOX. But when comparing it to its historical volatility, Visa Class A is 32.02 times less risky than BOX. It trades about 0.16 of its potential returns per unit of risk. BOX is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.02 in BOX on August 31, 2024 and sell it today you would lose 0.00 from holding BOX or give up 13.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Visa Class A vs. BOX
Performance |
| Timeline |
| Visa Class A |
| BOX |
Visa and BOX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BOX
The main advantage of trading using opposite Visa and BOX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, BOX 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 BOX will offset losses from the drop in BOX'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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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