Correlation Between Visa and Capital Group
Can any of the company-specific risk be diversified away by investing in both Visa and Capital Group 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 Capital Group 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 Capital Group Growth, you can compare the effects of market volatilities on Visa and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Capital Group.
Diversification Opportunities for Visa and Capital Group
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Capital is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Capital Group Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Growth 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Growth has no effect on the direction of Visa i.e., Visa and Capital Group go up and down completely randomly.
Pair Corralation between Visa and Capital Group
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.03 times more return on investment than Capital Group. However, Visa is 1.03 times more volatile than Capital Group Growth. It trades about 0.33 of its potential returns per unit of risk. Capital Group Growth is currently generating about 0.23 per unit of risk. If you would invest 28,960 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 2,548 from holding Visa Class A or generate 8.8% 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. Capital Group Growth
Performance |
| Timeline |
| Visa Class A |
| Capital Group Growth |
Visa and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Capital Group
The main advantage of trading using opposite Visa and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Capital Group vs. Vanguard Growth Index | Capital Group vs. iShares Russell 1000 | Capital Group vs. iShares SP 500 | Capital Group vs. iShares Core SP |
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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