Correlation Between Visa and Krispy Kreme
Can any of the company-specific risk be diversified away by investing in both Visa and Krispy Kreme 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 Krispy Kreme 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 Krispy Kreme, you can compare the effects of market volatilities on Visa and Krispy Kreme 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 Krispy Kreme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Krispy Kreme.
Diversification Opportunities for Visa and Krispy Kreme
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and Krispy is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Krispy Kreme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krispy Kreme 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 Krispy Kreme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krispy Kreme has no effect on the direction of Visa i.e., Visa and Krispy Kreme go up and down completely randomly.
Pair Corralation between Visa and Krispy Kreme
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.58 times more return on investment than Krispy Kreme. However, Visa Class A is 1.71 times less risky than Krispy Kreme. It trades about 0.35 of its potential returns per unit of risk. Krispy Kreme is currently generating about -0.06 per unit of risk. If you would invest 28,119 in Visa Class A on August 26, 2024 and sell it today you would earn a total of 2,873 from holding Visa Class A or generate 10.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Krispy Kreme
Performance |
| Timeline |
| Visa Class A |
| Krispy Kreme |
Visa and Krispy Kreme Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Krispy Kreme
The main advantage of trading using opposite Visa and Krispy Kreme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Krispy Kreme 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 Krispy Kreme will offset losses from the drop in Krispy Kreme's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Krispy Kreme vs. Sendas Distribuidora SA | Krispy Kreme vs. Natural Grocers by | Krispy Kreme vs. Sprouts Farmers Market | Krispy Kreme vs. Albertsons Companies |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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