Correlation Between Visa and Capital Management
Can any of the company-specific risk be diversified away by investing in both Visa and Capital Management 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 Management 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 Management Mid Cap, you can compare the effects of market volatilities on Visa and Capital Management 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 Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Capital Management.
Diversification Opportunities for Visa and Capital Management
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Capital is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Capital Management Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Management Mid 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 Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Management Mid has no effect on the direction of Visa i.e., Visa and Capital Management go up and down completely randomly.
Pair Corralation between Visa and Capital Management
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.91 times more return on investment than Capital Management. However, Visa Class A is 1.1 times less risky than Capital Management. It trades about 0.44 of its potential returns per unit of risk. Capital Management Mid Cap is currently generating about -0.01 per unit of risk. If you would invest 31,491 in Visa Class A on November 4, 2024 and sell it today you would earn a total of 2,689 from holding Visa Class A or generate 8.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Capital Management Mid Cap
Performance |
| Timeline |
| Visa Class A |
| Capital Management Mid |
Visa and Capital Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Capital Management
The main advantage of trading using opposite Visa and Capital Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Capital Management 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 Management will offset losses from the drop in Capital Management's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Capital Management vs. Pace High Yield | Capital Management vs. Catalyst Exceed Defined | Capital Management vs. The Hartford High | Capital Management vs. Chartwell Short Duration |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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