Correlation Between Visa and ESH Acquisition
Can any of the company-specific risk be diversified away by investing in both Visa and ESH Acquisition 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 ESH Acquisition 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 ESH Acquisition Corp, you can compare the effects of market volatilities on Visa and ESH Acquisition 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 ESH Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and ESH Acquisition.
Diversification Opportunities for Visa and ESH Acquisition
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and ESH is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Visa i.e., Visa and ESH Acquisition go up and down completely randomly.
Pair Corralation between Visa and ESH Acquisition
Taking into account the 90-day investment horizon Visa Class A is expected to generate 5.17 times more return on investment than ESH Acquisition. However, Visa is 5.17 times more volatile than ESH Acquisition Corp. It trades about 0.09 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.08 per unit of risk. If you would invest 20,975 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 10,533 from holding Visa Class A or generate 50.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 74.75% |
| Values | Daily Returns |
Visa Class A vs. ESH Acquisition Corp
Performance |
| Timeline |
| Visa Class A |
| ESH Acquisition Corp |
Visa and ESH Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and ESH Acquisition
The main advantage of trading using opposite Visa and ESH Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ESH Acquisition 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 ESH Acquisition will offset losses from the drop in ESH Acquisition's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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