Correlation Between Visa and Consumer Services
Can any of the company-specific risk be diversified away by investing in both Visa and Consumer Services 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 Consumer Services 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 Consumer Services Ultrasector, you can compare the effects of market volatilities on Visa and Consumer Services 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 Consumer Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Consumer Services.
Diversification Opportunities for Visa and Consumer Services
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Consumer is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Consumer Services Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Services 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 Consumer Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Services has no effect on the direction of Visa i.e., Visa and Consumer Services go up and down completely randomly.
Pair Corralation between Visa and Consumer Services
Taking into account the 90-day investment horizon Visa is expected to generate 1.68 times less return on investment than Consumer Services. But when comparing it to its historical volatility, Visa Class A is 1.69 times less risky than Consumer Services. It trades about 0.09 of its potential returns per unit of risk. Consumer Services Ultrasector is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,351 in Consumer Services Ultrasector on August 26, 2024 and sell it today you would earn a total of 2,357 from holding Consumer Services Ultrasector or generate 70.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Consumer Services Ultrasector
Performance |
| Timeline |
| Visa Class A |
| Consumer Services |
Visa and Consumer Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Consumer Services
The main advantage of trading using opposite Visa and Consumer Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Consumer Services 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 Consumer Services will offset losses from the drop in Consumer Services' long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Consumer Services vs. Short Real Estate | Consumer Services vs. Short Real Estate | Consumer Services vs. Technology Ultrasector Profund | Consumer Services vs. Technology Ultrasector Profund |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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