Correlation Between Visa and Centrica PLC
Can any of the company-specific risk be diversified away by investing in both Visa and Centrica 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 Centrica 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 Centrica PLC ADR, you can compare the effects of market volatilities on Visa and Centrica 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 Centrica PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Centrica PLC.
Diversification Opportunities for Visa and Centrica PLC
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Centrica is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Centrica PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrica PLC ADR 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 Centrica PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrica PLC ADR has no effect on the direction of Visa i.e., Visa and Centrica PLC go up and down completely randomly.
Pair Corralation between Visa and Centrica PLC
Taking into account the 90-day investment horizon Visa is expected to generate 1.26 times less return on investment than Centrica PLC. But when comparing it to its historical volatility, Visa Class A is 1.61 times less risky than Centrica PLC. It trades about 0.05 of its potential returns per unit of risk. Centrica PLC ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 638.00 in Centrica PLC ADR on January 7, 2025 and sell it today you would earn a total of 67.00 from holding Centrica PLC ADR or generate 10.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.32% |
| Values | Daily Returns |
Visa Class A vs. Centrica PLC ADR
Performance |
| Timeline |
| Visa Class A |
| Centrica PLC ADR |
Visa and Centrica PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Centrica PLC
The main advantage of trading using opposite Visa and Centrica PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Centrica 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 Centrica PLC will offset losses from the drop in Centrica PLC's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Centrica PLC vs. NRG Energy | Centrica PLC vs. TransAlta Corp | Centrica PLC vs. Kenon Holdings | Centrica PLC vs. Pampa Energia SA |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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