Correlation Between Visa and Caffyns PLC
Can any of the company-specific risk be diversified away by investing in both Visa and Caffyns PLC 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 Caffyns PLC 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 Caffyns PLC, you can compare the effects of market volatilities on Visa and Caffyns PLC 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 Caffyns PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Caffyns PLC.
Diversification Opportunities for Visa and Caffyns PLC
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Caffyns is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Caffyns PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caffyns PLC 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 Caffyns PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caffyns PLC has no effect on the direction of Visa i.e., Visa and Caffyns PLC go up and down completely randomly.
Pair Corralation between Visa and Caffyns PLC
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.02 times more return on investment than Caffyns PLC. However, Visa is 1.02 times more volatile than Caffyns PLC. It trades about 0.1 of its potential returns per unit of risk. Caffyns PLC is currently generating about -0.09 per unit of risk. If you would invest 27,139 in Visa Class A on August 29, 2024 and sell it today you would earn a total of 4,331 from holding Visa Class A or generate 15.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Visa Class A vs. Caffyns PLC
Performance |
| Timeline |
| Visa Class A |
| Caffyns PLC |
Visa and Caffyns PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Caffyns PLC
The main advantage of trading using opposite Visa and Caffyns PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Caffyns PLC 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 Caffyns PLC will offset losses from the drop in Caffyns PLC's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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